How Do You Invest Your Personal Portfolio

I'm intrigued by the differences in opinion among so many investors, as there is really no right or wrong way to invest your assets. So it got me thinking:

How do you invest your personal portfolio and what is your strategy?

Are some of you still stock-pickers? Do some of you just make sector bets with ETFs or just buy core index funds? Anyone use more advanced strategies such as options or futures? Hell, anyone here not keen towards the public markets and rather invest in CRE or Private Equity? Strategy-wise, would you consider yourself a growth or value guy or prefer to just asset allocate?

 

I've got everything, including the bulk of my 401K, in ETFs and/or market mirroring mutual funds. I'll occasionally buy stocks when I've got the time to research and track just to stay sharp, but the market's performance the past few months has admittedly made me lazy. I was looking at my statement the other day and it had some insane figure like 10 or 11% YTD on there.

I prefer to look at mid-cap funds for the slightly higher return profile, but try to adjust the allocations every few months.

Next year I'll be adding a couple of RE investments into the mix.

 

Passive, all the way around. Lots of Vanguard ETFs. A meaningful chunk in Betterment.

I don't trade on my own because 1) I don't think I can beat the market risk-adjusted (given the time I'm willing to spend), and 2) my firm makes us declare all trades to compliance, and it's a huge pain in the ass.

"Son, life is hard. But it's harder if you're stupid." - my dad
 

more than half of my portfolio is in Berkshire stock. Company has a 19% CAGR and shows no signs of stopping. Buffett's inevitable death will be a temporary setback. 20% is in stock invested via the tenets of value investing and the rest is speculative stocks or options.

let's see Paul Allen's card
 

I'll add that I have my 401k fully allocated to a mid-cap index fund. In my IRA I'm invested in 5 large cap, household names (generally look for competitive advantages in the companies I buy that I believe can weather competition over long periods of time). With my excess savings I basically do 1-2 year high interest rate, 1st lien lending for real estate projects to buyers that usually don't have all the qualities (credit, stable income, etc.) banks are looking for when lending.

Still, I sometimes wonder with the amount of time I have (or lack there of), if I should just index my IRA......

Sent from my iPhone
 

401(k) - Entirely ETFs. Utilize the Morningstar Lifetime Allocation Index to set allocations, so have just about every market cap. range and geography covered. Also own a REIT ETF and a junk bond ETF.

Taxable account - Individual stocks that are a mix of buy-and-hold ideas and short-term trading ideas. Most are small cap. growth and most are tech. or healthcare. Also own some actively managed emerging markets funds, since I think emerging markets will be one of the best performing asset classes over my lifetime and are more inefficient than markets in the U.S. One of the funds I own (EFEAX) is technically a frontier markets fund.

Reasons for my strategy: Keeping the 401(k) on autopilot makes sense, since I want to focus my time and efforts on generating outperformance that I can benefit from earlier in life, not 40+ years from now when I retire. In terms of which investments are held where, I want to keep the income investments in a tax-deferred environment, while the growth-oriented investments can be held on the taxable side, since I won't pay taxes unless I sell. While there are some tax consequences from my short-term trading, it also has created opportunities to harvest tax losses, so my realized gains have been pretty small, while my unrealized gains continue to climb.

 

Allocate in large, mid and small with some international. A bit of fixed income, intermediate bond funds. I am also looking to add some RE funds and maybe silver, probably taking from large cap. Everything is passive and auto rebalances.

Only two sources I trust, Glenn Beck and singing woodland creatures.
 

I've personally made my better finds on top down analysis. Some prefer bottom up and there are plenty of different ways but that has just been my favorite. Try to identify some sort of trend that is going on in the market, then drill deeper into your idea. Try to identify what is a crucial driver of that trend. From there your mind should be full of more ideas and the ball gets rolling. You should have a couple of companies by then. Dig into those, I like to look into supply chain and logistical aspects of a company. I think smaller companies that have an established and efficient logistics network are great finds and something i try to look for the most. You'll find what you personally think makes a company great, but nuts and bolts will always be vital.

 

Thank you for the link. I wasn't getting good results from the search bar so I decided to post. While that thread is full of value ( I bookmarked it) I was asking for a more beginner version of screening for stocks. Most of the tips on that thread were for analysts and people in the industry who already have knowledge and connections. I am trying to get a simple process so I can do some self studying for the sake of writing research notes.

 

It is advisable to read and understand the basic functioning of the market and its products before investing. Leading broking firms like Karvy have abundant material available on their websites. Once you have enough understanding about the market, you can start reading research reports and see how the recommendations fair in the market. With a few tests, you’d soon gain good confidence to invest and get good returns.

 
wannabeaballer:

Dick, have you ever considered pitching a bond trading house at one of the startup weekends? I'm sure you'd gather some interest.

For sure I would. However, the teams you could assemble would be far too weak. For now, I just want to help young people realize their dreams. I've already built a global investment bank, so people have seen the tough and hard Dick, but now it's time for the softer side of Dick.
 

Dick, how would I seduce a woman into performing fellatio on me? In addition, what does one hand clapping sound like?

Once I did bad and that I heard ever. Twice I did good and that I heard never.
 
IBNazi:

Dick, how would I seduce a woman into performing fellatio on me?

Maybe you weren't aware that I'm married. That kind of thing seems like the memory of a dream within a dream. Now, anniversaries are my best bet for anything unconventional, especially those that end in a 5 or 0.
IBNazi:
In addition, what does one hand clapping sound like?
It sounds exactly the same as Hank Paulson's response to a liquidity crisis.
 
BatMasterson:

GRATs do work for wealthy individuals, considering how low interest rates are; also, it's for assets that rapidly rise in value.

I think the gift and estate tax rate is over 40%. There is an exemption of up to $5.25 million for 2013 (effectively $10.5 million for a couple), but if you bequeath more than that GRATs will save you a ton of money.

Well obviously the $10MM exemption is something we should all take advantage of, but I wanted to highlight some of the intermediate level techniques that we should all use. If you want to take it up a notch, you should consider using long positions in derivatives in GRATs with corresponding short positions in those same derivative positions through Cayman LPs that you set up with people that you don't know who are using the same wealth transfer techniques.

And you guys thought UBS was useless.

 
DickFuld:
So, if you get married, know your role and don't interfere with your spouse's role. It's simple really.

Holy shit this is on the nose! Everyone take note. Bravo, sir.

"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
 
mikesswimn:
DickFuld:

So, if you get married, know your role and don't interfere with your spouse's role. It's simple really.

Holy shit this is on the nose! Everyone take note. Bravo, sir.

Many successful and long married guys have given me this very advice. Along with the remarks that you need to strive to make a lot of money. This sounds shallow but it really eliminates all the 'heated conversations' around money. "Happy wife = happy life."

 

NOOOOOOOOO

don't take investment advice from WSO dude.

how old are you? assuming you're under 30, you should be all stocks & cash. never get completely out of the market. that being said, if you think valuations are high but you also don't have more than say 25k accumulated, just keep it all in stocks but diversified and continue adding on a monthly basis.

 

Well, the good thing about a forum is I am not simply just going to take everything at face value. If someone gives bad advice either intentionally or not, I am not going to blindly change my perspective off what they say. On the other hand, in my current line of work if you bring up investment questions to discuss, the only response you will get is about how well their Prestige Worldwide Mutual Fund is doing.

While I am under 30 my holdings are in the six figures which has changed my overall investing style. I used to have the ride or die mentality for investing, but am looking to taper it back a little. The reason having some bonds seems intriguing rather then just some cash on hand is due to the fact that I could sell out of the bonds and put the money back in stocks in the case of a correction. On the other hand, if I get "stuck" in a bond, at least I can simply wait until the maturity and make a decent percentage gain in the end.

 

The reasons I am so interested in allocating a portion of my portfolio to bonds is primarily due to the fact that a lot of the time environments of high valuations stocks continue to increase and investors who remained overly cautious would miss out on high returns. For instance I find stocks to be at uncomfortable valuation levels currently, but the environment could change based of matters such as a decrease in the value of the dollar improving earnings. Obviously you know far more about these matters than me and this is just an example of my overall mindset, but at what point would high valuations push me out of stocks and into other sources of investing?

My overall idea right now is to have an 80-20 stock to bond split as I think we still have a good amount of upside left in equities. At the same point, is it a good strategy to have 20% in bonds which I could sell and use to buy into stocks in the case of a correction? Is this a good protective strategy for maintaining high yields while at the same point not putting everything on the line? I am really asking because I truly don't know. I have never traded or bought an individual bond in my life and have always in the past been comfortable with having 100% of my portfolio in stocks.

 

For the more market savvy posters: Is there really any incentive to diversifying by investing in bonds at this moment? I ask because over the past few months I have been hearing more and more about stock/bond correlation.

Here is an article describing what I am referring to: morganstanley.(com)/ideas/portfolio-construction-bonds-stocks-correlation (insert www in front of morganstanley and remove brackets from "com")

Also: twitter.(com)/dailydirtnap/status/792012121949233152 (insert https//: in front of twitter and remove brakets from "com")

**** I had to link the articles this way because I do not have permission to post links yet.

 
f1mpladed:
i really like BP waiting for it to possibly dip a little

what is your investment stragey? growth?

Aggressive growth. I try to buy things that make sense to me and seem logical.

I bought BP back when they were $31, they seem to have leveled off over the last few months and I suspect they'll remain this way at least until Q2 '11 so I decided to sell of 80% this morning.

EZPW I bought back when it was $13, they were a strong value play with no debt, huge growth and essentially engaged in legalized loan sharking.

 

yeah i feel that BP might be kinda stagnant right nw.. espically with the uncertainty aobut all the law suits...

ill have to look into ezpw

you should look into SB, i dont know how it is in terms of aggressive growth, but its got a really good yield... not sure it will go much higher then say 10-12...

 

Tend to be risk averse/long term, lately have been looking for yield

MSFT, ORCL, AXP, BOA, FSTR, KO, VZ, DLN/DLO, CELG, TEVA, ABT, ED, CHK, NLY, WPZ.

Like to enhance returns by writing covered calls at levels I'd like to be called away at. Sometimes instead of buying shrs outright I like to sell naked puts at levels I like the stock at.

 

PKX, CRESY, ICO, PNCL.

All picks are stolen from Mohnish Pabrai's most recent 13-F.

Men are so simple and so much inclined to obey immediate needs that a deceiver will never lack victims for his deceptions. -Niccolo Machiavelli
 

bumppp. anything new?

"Look, you're my best friend, so don't take this the wrong way. In twenty years, if you're still livin' here, comin' over to my house to watch the Patriots games, still workin' construction, I'll fuckin' kill you. That's not a threat, that's a fact.
 

here what you guys thnk about doing something like this?

SB- 8.55 Marine Shipping company pays a 7% yield.. i think its going to go up or at least holds its value with a nice yield since, whether or not the recovery is here, more and more goods will be shipped in the future

 

Since you asked:

ALTAIR NANOTECHNOLOGIES INC NEW CENTURYLINK INC CHINA FUND INC CITIGROUP INC FAMILY DOLLAR STORES INC FIRST TRUST ISE GLOBAL COPPER INDEX FORTRESS INVESTMENT GROUP LLC CL A REP CL A LTD LIABILITY CO INT HUMAN GENOME SCIENCES INTEL CORP ISHARES MSCI TURKEY INDEX FUND ISHARES MSCI TAIWAN INDEX FUND ISHARES MSCI SOUTH KOREA INDEX FUND ISHARES MSCI MALAYSIA INDEX FUND ISHARES RUSSELL MIDCAP VALUE INDEX FUND ISHARES SILVER TRUST ISHARES MSCI INDONESIA INVESTABLE MARKET INDEX FUND KKR FINANCIAL HOLDINGS LLC KSW INC MARKET VECTORS INDIA SMALL-CAP INDEX ETF NORFOLK SOUTHERN CORP NORTH AMERICAN PALLADIUM LTD POWERSHARES DB AGRICULTURE TRUST SPDR S&P SEMICONDUCTOR ETF SOUTHWEST AIRLINES COMPANY SPRINT NEXTEL CORP SERIES 1 TARGET CORP THERMO FISHER SCIENTIFIC INC UNITEDHEALTH GROUP INC VERIZON COMMUNICATIONS INC

I also have a total market index, but that's boring. You have to watch with marine shipping. Perfectly competitive industry and each carrier has a surprisingly few number of boats (like 40 for a bigger carrier - these are those massive cargo ships) so if they have bad maintenance or take a bad route they're in trouble.

The reason I have rail is because there are few US rail companies and they have established routes and higher frequency transport. Plus Warren Buffets hiring at BNSF. I also picked Norfolk because it's got the east coast to itself for the most part.

 
monkeysama:
You have to watch with marine shipping. Perfectly competitive industry and each carrier has a surprisingly few number of boats (like 40 for a bigger carrier - these are those massive cargo ships) so if they have bad maintenance or take a bad route they're in trouble.

You need to be careful in marine shipping for the short term. The Baltic Dry Index has been dropping lately, and it is expected that there will be a surplus of ships next year, which may further weigh on spot prices. Given the uncertainty in the global economy (i.e. debt problems in Europe, slow US recovery, etc.), it can be a risky bet. I'd want to see some positive trending on spot rates and better global GDP growth before putting more money into sector.

Disclosure: I own DRYS and view it as a hold.

 
junior2012:
brooksbrotha, just out of curiousity, what's your story behind the xtex trade, cuz thats sick

I picked 5 energy companies in the U.S. last year that I constantly heard about in this market update for this software my school has. I took a close look at Xtex and what they've been doing over the past 5 years: buying up pipelines and refineries. Granted they now have a small bit of debt on their hands but with a boost in coverage over the NG market (6% of distribution in US), they have a steady stream of revenue. They had several presentations in the past month with BoAML and RBC for investors. Haven't seen that generate any market activity but I'm content where it's sitting at now.

I'm looking at Clearwire (CLWR) although it's pretty volatile and I'm not sure what'll happen with the recent Net Neutrality regulation stuff going on.

 

brooks- thats awesome..similar story, i bought YZC back when it was 3.5 something and sold it at 29... I also bought YGE a solar company back at 3 dollars... it shot up to around 18 , and i didn't sell... and now i still have it at around 10.. should be selling in the future.

monkeysama- i also like rail alot, just for me it would be hard buying say CSX Union Pacific- since they are quite alot, Ill check out the one you like, rail definitely seems to be the future.

 
f1mpladed:
brooks- thats awesome..similar story, i bought YZC back when it was 3.5 something and sold it at 29... I also bought YGE a solar company back at 3 dollars... it shot up to around 18 , and i didn't sell... and now i still have it at around 10.. should be selling in the future.

monkeysama- i also like rail alot, just for me it would be hard buying say CSX Union Pacific- since they are quite alot, Ill check out the one you like, rail definitely seems to be the future.

NICE! I had YZC too, but I bought at around $10. Still one of my fave China stocks. They had an unbelievable growth record and an almost unbelievable balance sheet.

Do any of you play options? I tend to stick with stocks for long term and use options to make quicker profits.

 

Anyone read up on the endowment model? I'm reading a book on it as I intern with a boutique firm that uses it. it's basically a strategy of using a mix of "Swing Assets" (U.S. Bonds, U.S. Equities, Cash) and a thing called an Alpha Core (venture cap, commodity funds, real estate, int. equity, etc). Of course you can't effectively use the strategy without several million to pony up (hedge funds require $1-5M to invest) but still an interesting concept overall.

 

yeah bulge... yeah i really dont even know what made me by it... it was one of my first stocks that i bought when i was starting out and it was china and coal so i thought it must be good.. and had a decent balance sheet etc...

unfortunately i was going to hold on to it but i panicked during the flash 'crash'... looking back though i think i sold it at the right time anyways

as for options... ive been wanting to do it for a very long time now.. but was never approved until NOW lol

theres going to be a option101 thread that another member is starting up... check it out

 
f1mpladed:
yeah bulge... yeah i really dont even know what made me by it... it was one of my first stocks that i bought when i was starting out and it was china and coal so i thought it must be good.. and had a decent balance sheet etc...

unfortunately i was going to hold on to it but i panicked during the flash 'crash'... looking back though i think i sold it at the right time anyways

as for options... ive been wanting to do it for a very long time now.. but was never approved until NOW lol

theres going to be a option101 thread that another member is starting up... check it out

haha I just recommended that in your thread earlier f1. Is someone actually doing it?

 

brooksbrotha-yes i think so lol

thanks i worte the S word lol

what we should do guys... is people that are serious, we should all share our skype names and have like a weekly "stock pick" or option conversation where we discuss various stuff. Hopefully we can get some people in the industry to contribute there findings, information, opions etc

 

I'm thinking a lot about going long the Yuan. Especially EURCNY is becoming more attractive every day.

Lots of reasons that favor a future appreciation which is not already priced in. Also, the risk that China will further devalue their currency and therefore get their economy overheating even more is very small.

This seems to be a trade with a great risk/reward ratio, but it is very hard to estimate the time-frame of a future appreciation, which would make this trade also financially attractive compared to other ideas. If I have 1 idea which is returning 5% every month I am better off after one year than if the yuan appreciates by 50%. And I am not thinking about using a ridiculous amount of leverage.

 

enzon pharma- currently selling for the PV of their current drug royalties, so you get a drug pipeline including several promising phase II's for free. Catalyst is a significant amount of activist ownership (baupost, icahn) who will make them sell the pipeline if needed.

reading international-cinema/real estate developer that looks fairly valued but has incredibly undervalued land on balance sheet. Catalyst is them selling their biggest undeveloped land in Sydney that should net close to $2 of additional book value ($5 share price)

Market looks rich-sticking to event driven plays

 

enzon looks preety good ill have to check that out...

what do you guys think of water utility stocks- with the perhaps looming water shortage crisis in the future??

also any agree that rail transport is the way to go in terms of investing? BNSF was mentioned earlier and that looks really promising, what about CSX? or are there any midcap or

 

I looked at BP with a friend. At $280 billion revenue run rate, historical margins to $32 mm ebit, you get $21 million nopat. Assuming no growth and capitalizing at WACC of 10% and then less net debt, you get an earnings power of $60 per share. And remember with any future lawsuits-the longer they're pushed off, the lower the present value (exxon valdez paid 19 years after their spill...).

 
f1mpladed:
whats everyone feel on natural gas companies??

exploratory oil?

rail road sector?

For natural gas-I used to be in contango oil and gas (best one I've found-was dirt cheap and lowest cost producer it didn't need to hedge any production). I think the industry will be fine long term, but will only buy one if I can get it below its PV of its proven reserves. For a while, contango was insanely cheap and buying back shares. Based on the amount of proven reserves per share of stock, the company was essentially buying its own proven reserves at a fraction of what it would cost to actually replace them-crazy. Sold out into some strength but always watching it it's a phenomenal company.

 
GoodBread:
I like your style iambateman. Do you have stops on those futures?

i dont currently, i probably should trade in and out of the positions more but right now just kinda letting em ride and shorting more on pops.

japanese short bond story has been told a million times. if you are unfamiliar google kyle bass japanese bonds. this is in my opinion just a great assymetric risk/reward trade. yields cant really go that much lower but have potential to go 5%+ if all hell breaks lose in japan.

i think 30 yr goes to 5+%, my biggest position. been in since yields were like 4.2%, have added to this position on pops.

euro is fucked, i think we see 1.2 or lower in 2011. the entire country is fucked and i think germany will end up getting sick of subsizing everyone and may even pull out of the EU.

 
  • Looking into muni etfs where I can buy puts
  • shorting grocery stores
  • miners w/ FCF
  • long core european rates (rising yields)
  • SPX/AUDJPY convergence
 
monty09:
I want to invest in a start up film company

do you have a script or idea that you want to produce or do you just want to invest in someone else who does? A few years ago i looked into trying to produce a short film with an eye towards getting into festivals, etc. It was going to be a project that was not attempting to even break even but rather would just get me a taste of an interesting industry and help me learn about it. Small, Independent production companies are a very tough business if the goal is to make alot of money....or any money for that matter. I actually have a couple of ideas for scripts I would like to develop (jncluding a Wall St-related one) if I had time which i dont given my commitment to my day job.

 

yeah ive been reading many articles how the market is over bought, but could this be a case of when other are bearish be bullish etc....

interesting note: around 10000 people a day will be turning 65

healthcare stocks poised to boom?

 

MNDO... check it out: manufactures and markets real-time and off-line billing and customer care software

and ASIA: provides telecommunications software solutions and information technology (IT) security products and services in China.

 

f1mpladed, I agree that current events should drive the price of oil higher but I think that bet would be best expressed more directly with a call on USO. The logic is that there is bound to be some slippage (basis risk so to speak) when substituting with oil majors, who furthermore are exposed to specific risks you probably aren't being rewarded for (what if a BP plant is shut down by turmoil? Oil goes up, BP goes down).

 

I would not- even if this was done in a fashion that wasn't 100% pure luck and speculation, anyone reading the resume would laugh and not take it seriously- I would never put returns.

Just put something under interests like value investing/ futures trading/ distressed investing / day trading or whatever you do. If they bring it up in an interview talk about your strategy or a good investment. If they ask your returns then you can say.

 

This post really resonates with me.

I have been somewhat paralyzed by the thought of actually starting to conduct compny/industry research because I don't want to start without reading/learning as much as I can first.

However, I know that I know enough to at least begin somewhere.

I think the next hinderance I have set for myself is not knowing what company to begin with and I would imagine a lot of beginners find themselves in the same boat.

With so many industries and companies out there, it can be a fairly daunting task to choose your first one to begin the process of becoming an investor.

In the hopes of helping myself and all the other prospective investors on this site, would you care to provide a list of companies or some sort of guidelines to choosing a small and simple company?

I know personally, that would be extremely helpful in finally taking my first steps and putting some of my knowledge to work and to getting the proverbial Snowball rolling.

Thanks

 
CanadianPositiveCarry:
Growing up in an old money Canadian family

Wow that's incredible, so is your family in the maple syrup or moose hunting business?

My drinkin' problem left today, she packed up all her bags and walked away.
 
Kenny Powers:
CanadianPositiveCarry:

Growing up in an old money Canadian family

Wow that's incredible, so is your family in the maple syrup or moose hunting business?

lmfao, but seriously how can you berate the people people buying fancy things with their money and then describe your self as coming from an "old money Canadian family" in the same post

 

I completely agree. No one is impressed by overpriced off the rack italian suits or bottles at the club besides gold digging chicks. What will impress people in the long run is the fact that you've built wealth rather than squander your extremely high pay on massaging your ego.

 

I notice more often than it's people who don't come from money who then suddenly have access to it who spend in excess. The other side of the coin is those who don't need to think about how much they're spending.

Offshore liffe
 
big1:

I notice more often that it's people who don't come from money who then suddenly have access to it who spend in excess..

Completely agree on this one. It's like it pervade their character regardless of what they do.
 
CanadianPositiveCarry:

Not to mention the fact that we actually know our shit when it comes to investing...

This statement is Sooooo far from reality most of the time. Bankers are some of the most clueless people I've encountered when it comes to investing and really any facet of personal finance. Remember that Morgan Stanley chick who made VP and couldn't even balance her checkbook? She started a personal finance website after leaving MS.

 
Edmundo Braverman:
CanadianPositiveCarry:

Not to mention the fact that we actually know our shit when it comes to investing...

This statement is Sooooo far from reality most of the time. Bankers are some of the most clueless people I've encountered when it comes to investing and really any facet of personal finance. Remember that Morgan Stanley chick who made VP and couldn't even balance her checkbook? She started a personal finance website after leaving MS.

Wait, are you suggesting that reverse engineering DCFs and adjusting pitchbook typefaces are not relevant to making investing decisions?

 
CanadianPositiveCarry:

Working at BB IBD full time I am just amazed at how wasteful everyone is with their money. Growing up in an old money Canadian family, I've always been taught to invest 20 % of my earnings into a diverse portfolio. That's what I plan on continuing to do as I move through my IB career. However, people all around me try to impress each other with expensive bottles of champagne, LV suits, and overpriced gym memberships. Instead, why not just invest your money and build wealth? Not to mention the fact that we actually know our shit when it comes to investing...

Actually, the reason all my non-401k/Roth IRA savings are in my checking account is because I have no idea about how to invest lol.

I mean, I’ve read the Intelligent Investor and follow a few websites, but even diversified equity ETFs and Bond ETFs are scary with stocks at an all time high and interest rates at an all-time low. I know it’s irrational, I just have no idea where to begin...

 
Aero:
CanadianPositiveCarry:

Working at BB IBD full time I am just amazed at how wasteful everyone is with their money. Growing up in an old money Canadian family, I've always been taught to invest 20 % of my earnings into a diverse portfolio. That's what I plan on continuing to do as I move through my IB career. However, people all around me try to impress each other with expensive bottles of champagne, LV suits, and overpriced gym memberships. Instead, why not just invest your money and build wealth? Not to mention the fact that we actually know our shit when it comes to investing...

Actually, the reason all my non-401k/Roth IRA savings are in my checking account is because I have no idea about how to invest lol.

I mean, I’ve read the Intelligent Investor and follow a few websites, but even diversified equity ETFs and Bond ETFs are scary with stocks at an all time high and interest rates at an all-time low. I know it’s irrational, I just have no idea where to begin...

echo this. I've got $45k saved up (finishing up 1st yr as analyst) and its all in a high interest savings account... earning a real 0%. Of course its stupid - I know that logically. but I keep telling myself that once I get my bonus I can actually spend time thinking about what I want to do with it.

is no one else concerned/paralyzed by the following two things:

  1. You have no idea what you'll be doing in 2 years/your money needs. Could equal pulling out savings at a market bottom while crying inside about how many 100hr weeks that money cost.

  2. You work so damn hard and the thought of losing that money in the market is scary.

Just my 2 cents but an explanation of how some people can have literally their entire net worth in cash and know its stupid but not do anything about it....

 

Old money Canadian family?

Ha, dude, being the guy that sells Labbat Blue at children's hockey games doesn't make you "old money" anywhere outside of Canada, even though it probably got you elected mayor of whatever snow bank you crawled out of.

Really easy to say everyone should have a diverse actively managed portfolio when you've never worked a private side job where you had all kinds of trading restrictions. Yeah, I'm sure nobody's ever thought of that one before. If only a savior like you had come along earlier with this secret wisdom that I should invest a portion of my earnings in a diversified portfolio, I probably wouldn't be the proud owner of thousands of shares of worthless Lehman Brothers stock.

Oh wait, for most of us that's fucking illegal..

 
CanadianPositiveCarry:
Not to mention the fact that we actually know our shit when it comes to investing...

You think you know how to invest thank to your 0-2 experience modeling to management expectations and pitch book building?

Follow me on Twitter: https://twitter.com/_KarateBoy_
 
KarateBoy:
CanadianPositiveCarry:

Not to mention the fact that we actually know our shit when it comes to investing...

You think you know how to invest thank to your 0-2 experience modeling to management expectations and pitch book building?

I'll second that, no offense to all of my HF people out there. If you aren't in PE or at a long term value fund you don't know shit about investing. Sure you might be able to point out arb or know how to do momentum trades or can throw your firms resources around to make a stock move. But that isn't investing. You need to know valuations sure but investing is about a game plan, its about the 5 10 15 20 30 and 50 year plans. These are things many IB guys think they know but in reality they don't.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

this is where you are a bit off base. mutual fund is a structure, not an investment strategy. Jack Bogle, the king of index funds, owns mutual funds for himself and recommends people pick this structure for the long term (http://www.thestreet.com/story/13326091/1/jack-bogle-trump-is-wrong-etf…)

there's nothing inherently bad with the mutual fund structure versus the ETF structure (personally, I prefer the fund since it only trades once a day, less opportunity for disconnects like we saw in late August). and by the way, there are low fee mutual funds (vanguards total stock market admiral shares is 5bps), and there are high fee ETFs, what I believe you are saying is that you should buy index funds and not try to beat the market, which is a different argument.

now back to the OP...

OP, don't ask for investment advice on WSO. 90% of this forum is 15-20yo virgins who fap to having a business card that says bx, gs, or any hedge fund, many of them are not investors and have no idea what they're doing. there are some people who work at funds, both 40 act and hedge funds, but they don't share investment ideas, so the info you get will likely be shit.

by passive, do you mean index funds? or passive, as in you don't want a trading strategy?

if you want an index fund, buy the lowest cost vanguard total stock market index mutual fund, reinvest the dividends, and you're done. but personally, if you just came into this money, I'd recommend you talk with a few people first: relatives, family's financial advisor, etc., I've seen too many times people inherit money like this and then blow themselves up because instead of sticking with stocks for 20y and then not touching it, they trade in and out, make sector bets, and above all else, make these decisions at the worst possible times (e.g. selling in february 2009 or august 2011), but they always defend themselves because they're not paying anything in fees.

let me know if you have any other questions

 

Usually PE targets are:

-very mature companies that have been established in their industry or sector -have assets that are not being utilized to their fullest, or have many unprofitable assets/businesses that can be sold off -ineffective management that can be replaced -high solid cash flows and low debt, solid capital structure (as you mentioned)

besides that, there are a bunch of other things that are case by case. for example if they see a multiple arbitrage opportunity between markets, PE firms will take advantage of that. But yeah, for the most part, that's it for the general traits

 
  • strong market position in a stable industry with miminal cyclicity (or industry is at low point of cycle)
  • Unique set of assets (brand, retail footprint, distribution network, industry expertise, patents, etc) that is difficult/expensive to replicate (high barriers to entry)
  • minimal pricing pressures, including low threat of foreign low-cost countries entering market (or internet), rational industry players and no substitutional products
  • occassionally, companies that need to radically restructure but cannot do so in a public-equity environment (need to take a one-time major hit on earnings to reposition themselves)
 

probably a dumb question...

but why is it a requirement that a PE target have low debt? does it only have to do with not being able to leverage the investment as much because of existing debt levels? or are there any other factors?

and i only really hear about this in regard to PE firms--is it ever a factor in good ol' corporate M&A? or not?

 

Not a dumb question. It's actually a dumb investment criteria. PE firms don't care about current debt load because they are going to bring their own financing structure to the table (probably much higher debt- 'Leveraged'BO) and the old debt gets refinanced anyway. The only time existing debt comes in to play is if its greater than the enterprise value (rare) or if there are major prepayment penalties - in which case they may just assume the existing debt and probably pile on more of their own.

 

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