Comments on: All Investing Involves Risk *

By: This Week in Review, Getting Well Edition | The Personal Finance Playbook

This Week in Review, Getting Well Edition | The Personal Finance Playbook — Fri, 12 Jun 2009 12:05:31 +0000

[...] All Investing Involves Risk @ Dividends Value – I couldn’t agree more. There’s no asset allocation that involves no risk. I’ve heard a lot of people lately saying they’re converting their funds to cash. Besides locking in losses on their investments, they’re also adding to their risks if inflation were to occur (which is fairly likely). The safest investment I know about are TIPS (Treasury Inflation Protected Securities), but don’t expect to make huge returns. If you find an investment that offers a solid return and no risk, it’s probably a scam. [...]

By: Money Hacks Carnival 68- Stanley Cup Final Edition | Financial Highway

Money Hacks Carnival 68- Stanley Cup Final Edition | Financial Highway — Wed, 10 Jun 2009 09:05:39 +0000

[...] presents All Investing Involves Risk posted at Dividends Value, saying, “If your goal is to accumulate wealth for a comfortable [...]

By: Carnival of Financial Planning - Edition #92 | ZachStocks

Carnival of Financial Planning - Edition #92 | ZachStocks — Sat, 06 Jun 2009 15:14:50 +0000

[...] Dividends4Life presents All Investing Involves Risk posted at Dividends Value, saying, “If your goal is to accumulate wealth for a comfortable retirement, then there is no risk-free path. Throughout time every angle has been tried and failed. However, some approaches carry less risk than others. Let’s consider some of the popular paths.” [...]

By: Joseph Oppenheim

Joseph Oppenheim — Wed, 03 Jun 2009 13:07:19 +0000

I prefer individual bonds held to maturities versus bond funds or ETFs. Since I am holding to maturity, I know I will eventually get the face value of the bond. I don’t get the same benefit from bond funds/ETFs.<<<<<

I agree, though I only consider Treasuries, and currently inflation-protected Treasuries (TIPS) are what I own. By the way, for smaller amounts, US I-Savings Bonds are also pretty good. I think I-Savings Bonds are also good instead of 529 educational accounts.

My general approach with any investment, is to eliminate the middle man, so to speak, as much as possible. It is easier to avoid crooks that way, not to mention additional fees. There is no way I would trust ETFs. Besides that they are simulated mutual funds, something I don’t like, that they are new raises other uncertainties. Heck, Credit Default Swaps were marketed like insurance products, but they were a scam to avoid insurance regulations. I suspect many ETFs are constructed for the real purpose of avoiding regulations which apply to mutual funds.

Plus, in my case, I only want to invest in companies which I think are in moral businesses. That is one reason I would ignore Mutual Funds, ETFs, especially index funds/ETFs. So, that is another reason for me to avoid them, though I don’t like the concept anyway like I said above.

By: Super Saver

Super Saver — Wed, 03 Jun 2009 01:33:36 +0000

By: Dividends4Life

Dividends4Life — Tue, 02 Jun 2009 21:48:28 +0000

Joseph: You are correct that today CDs are outpacing inflation, but over time they tend to fall behind. My point was that someone in their 20s or 30s couldn’t build an effective retirement solely using cash investments.

Best Wishes,
D4L

By: Joseph Oppenheim

Joseph Oppenheim — Tue, 02 Jun 2009 17:07:26 +0000

I don’t agree with you about CDs not being investments, that is longer term ones like FDIC-insured 5-yr CDs with low early withdrawal penalties. By shopping around, I have always been able to find ones with attractive yields. And, with low early withdrawal penalties, like 6 month simple interest, they afford protection against inflation since if interest rates rise a lot it is easy to swap them for higher yielding ones.

Right now, the best I find is a 5-yr CD yielding 4%. Since we are currently in deflation, I think this an outstanding INVESTMENT, especially since the early withdrawal penalty is only 2%. So, hold it just 6 months and you haven’t lost anything if closing it. If interest rates spike, great, since it is a win-win situation, rarely available with other assets – protection against both deflation and inflation, plus guaranteed by the US government. Such insurance was rare among other countries until recently when this financial mess began.

Plus, if one holds them in a Roth IRA, one can owe no taxes on the interest.

I am not saying to only hold CDs, but I do think they have a large place in one’s portfolio, especially since they proved to be risk-free during the last year or so of this financial mess. Even Warren Buffett can’t claim such success.

There are actually some advantages the little guy has, and CDs are one of the advantages. The big guys with mega cash amounts were forced into all these crazy SIVs, wacky collateralized debt stuff, etc, in search of yields. The little guy didn’t have to do so.