360⁰ Wealth

Saturday, May 9, 2009

Morningstar | Seven Ways to Simplify Your Investment Life

Investing can be overwhelming. Once you get to the point where you invest through many different products and vehicles; 401ks, IRAs, Roth IRAs, 529 plans, CDs, taxable accounts etc, it can seem to be a daunting task to manage them all. These are a few guidelines provided by Christine Benz of Morningstar to create a minimalist portfolio; one she says you can depend on.

1. Stick with the Basics: Ignore the crowd and the everyday noise of the market. Stick with low-cost, broadly diversified mutual funds with veteran management teams and great long-term reward/risk profiles.

2. Investigate One-Stop Funds: Consider Target-Date funds. These are ideal for people who do not have the time to research or monitor companies on their own. Target-Date funds are funds which grow more conservative as your goal draws near. That is, it automatically adjusts your risk profile (percentage of stocks to bonds on portfolio) as you age or go closer to retirement.

3. Index: With indexing, you accept the market’s return rather than trying to beat it. Warren Buffett recommends this to any investor who does not have the time to study companies; buy low-cost index funds and hold for the long term. You would perform well over time this way.

4. Take the Best and Leave the Rest: Pay specific attention to your asset allocation over all your investment portfolios.

5. Jot Down Why You Own Each Investment: This is a very important step. Warren Buffett says that you should be able to explain why you own any company in a simple paragraph. Christine says “By writing down why you made an investment in the first place, you’re more likely to make sure that the investment meets its original goal.If it isn’t doing what you expected by sticking with a specific investment style and producing competitive long-term returns, you’ll be ready to cut it loose.”

6. Consolidate Your Investments with a Single Firm or Supermarket: This eliminates excess complexity and paperwork.

7. Put Your Investments on Autopilot: Dollar Cost Averaging is a great strategy with long-term benefits.

Read the full details here >>>

Saturday, May 2, 2009

Being a Steward of your Assets

There is no one idea that can be used on the pathway to financial independence. It is a combination of different strategies that should be used in order to create the conditions that would ultimately lead to that state. Yes, financial independence is a state of mind in a big way, however, it is wise to set certain processes in motion early, so that the necessary conditions can exist later on in your life. You will then have the freedom and flexibility to do certain things that are truly important to you.

What does it mean to be a steward?

Since we all work and as a result generate income, it is important that we respect ourselves enough and be stewards of our assets. The income we generate represents our lifetime of studying, working, parents working and also the work of society as well. Therefore we should really be fiscally responsible and be the stewards of everything that we own; our bodies, our material objects and of course, our financial assets. To be a steward then means to consider your life and what you want to achieve, and take the necessary steps to have them manifest. It is the act of being responsible and preparing for the inherent risks of life and those that depend on you. It is also important to consider society as a whole; it is because of society that we are able to work and generate income. Therefore, it is our responsibility to give back in any way we can; it could be time, money, ideas or any other valuable contributions we can make to the world.

I read this great excerpt by a Senior Editor Money Magazine and was inspired to write this short piece. This is the excerpt from an article about how much should one save to be financially responsible:

“Well, as much as I’d like to be able to tell you to save 10%, 15% or whatever and you’ll be fine, it’s impossible for me to do that without knowing a whole lot more about you. The percentage of income that’s appropriate for you will depend on your income, age, the amount of money you’ve already saved, your employment prospects and, most important, how much you’re willing to forego immediate gratification for current and future financial security.”

See full article here >>>

What stood out to me was the last part of the final sentence; “how much you’re willing to forego immediate gratification for current and future financial security.” Fortunately, I do live a relatively simplistic lifestyle, yes, even in New York City, but I do have big dreams that I know will be realized in due time. In that sense, it is where I see myself in the future that is dictating my choices today.

Be a financial steward; take care of your assets.

Friday, May 1, 2009

The Secrets of Financial Freedom | An Interview with a Millionaire Next Door

This interview by J.D. Roth of Get Rich Slowly, one of my favorite personal finance blogs, is a great read. John, as he is called, followed basic principles that we all are able to adhere to, in order to achieve wealth. I am certain that many of these principles will be very familiar to the readers of this blog, however, hearing it from someone who has practiced them consistently for a lifetime can have a different effect. Read this interview and work on incorporating some of them into your own life. Practice creates a habit and habits bring about change. Enjoy!

These are some of the main principles:
1. Spend less than your earn.
2. Learn what a kilowatt hour is.
3. If you have a credit card, you should benefit from it.
4. People need to learn to cook from raw materials.
5. It is ok to buy used.
6. A dollar spent will never produce dividends.
7. No-load mutual funds are the only way to go.
8. Volunteer to help others.