Note: Much of this post is obsolete. I no longer allocate based on the investment targets as described below.
I am a process oriented investor. By process oriented I am referring to a defined system that I follow when investing – to the point it is nearly mechanical. That’s not to say it is rigid; it is constantly evolving and changing as I learn.
At the foundation of my investing process are active investment types and target allocations (see chart). Active investment types are investment vehicles that I contribute to on a monthly basis outside of my retirement accounts [401(k), IRA, etc.] Each of the three investment types are described below:
I currently own two mutual funds:
- An S&P Index Fund that I haven’t made a contribution to since December 2004. This fund is used to benchmark all my other investments.
- An actively managed large cap blend fund. This fund, more often than not, beats the aforementioned S&P Index Fund. Its life-to-date annualized return is usually in the 11%-14% range.
As noted in the chart above, my target % for Mutual Funds is one-third (33%) of my active investments. The goal of this portion of my investments is to beat the market averages by utilizing professionals. I am comfortable with the Mutual Fund’s performance and it is currently on auto-pilot, so I don’t anticipate spending any time discussing it.
Indexed ETFs (Exchange Traded Funds)
This third (33%) of my active investment is divided into the following two segments evenly split at 16.5% each:
- Asset Allocation ETFs: This strategy is based on an article by Richard Jenkins on MSN Money titled “A simple ETF strategy for beginning investors“. Don’t let the “beginning investors” term scare you away. I have found this strategy to be very effective. The goal of this portion of my investments is to provide diversification over a broad allocation of stocks. Since these investments are mechanical, I don’t anticipate spending any time discussing them.
- Dividend / Income ETFs: The goal of this portion of my investments is to provide a growing dividend income with lower risk than owning individual stocks. I am still tinkering with this portion of my investments, as such, I anticipate spending some time discussing it.
The final third (33%) of my active investments is dedicated to dividend / income producing stocks. This portion of my investments will be the primary focus of this site as I try to refine the analytical process used to identify worthy investments.
I look forward to the journey and invite you to come along with me!