ITA Wealth Management

What is the starting point for a beginning investor.  This link will provide one example of how one might begin with $100 per month.  Don’t be turned off by the returns.  Remember, we are near the bottom of a severe bear market, much like I experienced in the middle 1970s.  Looking back, it was the best of times for the young investor.

Lowell Herr

Photograph: Peru – Check out those rock walls.  They have been in place for centuries.

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Beginning investors not familiar with ETFs will find a number of short videos of interest.  Unfortunately, clicking on one ETF video does not create a straight through link to the one or two I would recommend.  So take this route and then do a Search for ETFs on the MSN site.  Near the top right corner click on View All.  Then find the woman in the bright red jacket.  View that interview.  It is titled, “How to select ETFs.”

My recommendation is to stick with the liquid ETFs such as provided by Barclay’s iShares or Vanguard.  If Vanguard meets your needs go with them as their expense ratios are as low as one finds.

Lowell Herr

Photograph:  Mt. Bachelor near Bend. Oregon

In market conditions such as we are experiencing, and particularly a week like this one, it is time to once more review the basics.

• Go back and review “The Golden Rule of Investing.”  Young people in particular should be putting this rule into effect in a big way – assuming they have some earning power.
• Make sure you have an investment plan in place.  Know what asset classes are important to your portfolio.  If nothing else, break it down into U.S. equities, REITs, developed international, emerging markets, bonds, and possibly commodities.
• When setting up the percentages in each asset class, consider that over one-half of the world market is outside the United States and that percentage is growing.
• Use index funds or ETFs to populate the asset classes.  If you are a stock picker, think twice about using only individual stocks to populate the portfolio.  My investment preference is the Mosaic approach to investing.  That means the core holdings are ETFs spread across many asset classes with some highly selected stocks dotted among those index investments.  Several examples are provided over on the Premium Content side of the blog.
• Take time to read the academic literature and books related to the importance of indexing.

Readers new to this blog should search for Bernstein, Gibson, Hebner, Ferri, Swedroe, Fama, French, Ibbotson, Sharpe, Brinson, Edesess etc.  Note that a search for any of these authors will also bring up this entry so move on to older entries.  Check out posts I entered in February and March of 2008.  There is a lot of the basic material to be found in those early entries.

Readers interested in knowing how to use and operate the Thomas/Lalla/Herr spreadsheet will need to sign up for a Premium subscription.  Premium users also gain access to the seven portfolios operating in that space.

Asset allocation is not a magic wand in a sinking market, as you will see with the seven portfolios.  Portfolios started in the last year are doing a miserable job in absolute terms, but they are holding their own when comparing performance to the VTSMX benchmark.

Again, develop an investment plan, learn how to accurately measure performance, know what risks you are taking to achieve the goal, and know how to measure the portfolio performance with respect to a benchmark.

And now on with portfolio management.  May the market begin to turn around soon.

Lowell Herr

Photograph: Ollantaytambo, Peru

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