Monday, November 26, 2007

Morninstar Analysis of My New Proposed Portfolio and Some Modifications to It

So here is the Morningstar Instant X-Ray analysis of the portfolios I previously discussed.


The Portfolio Paul Merriman recommends (with reservations) in his blog:
20% American Mutual AMRMX
20% Growth Fund of America AGTHX
20% EuroPacific Growth AEPGX
30% Small Cap World SMCWX
10% New World NEWFX
My Current Portfolio (as withheld, not as currently allocated from growth):
10% AMCAP Fund AMCPX
15% American Balanced ABALX
15% American Mutual AMRMX
15% Capitol Income Builder CAIBX
15% Income Fund of America AMECX
15% Investment Company of America AIVSX
15% Washington Mutual Investors AWSHX
The Portfolio that I settled on:
15% American Mutual AMRMX
10% Growth Fund of America AGTHX
15% Capitol Income Builder CAIBX
20% EuroPacific Growth AEPGX
30% Small Cap World SMCWX
10% New World NEWFX
So I "analyzed" each of these with Morningstars Instant X-Ray tool, if you even want to call what I did analyzing, and here are the results:

Paul's Recommendations with Reservations:
41% Domestic / 47% Foreign
66% Large / 34% Small-Mid
40% Growth / 27% Value

My Current Portfolio:
65% Domestic / 12% Foreign
91% Large / 9% Mid
26% Growth / 37% Value

My Hybrid Portfolio:
33% Domestic / 50% Foreign
64% Large / 35% Small-Mid
36% Growth / 31% Value

Wow, I didn't expect Capitol Income Builder to be such a swayer towards international. It made me want to do CIB by itself:
27% Domestic / 38.5% Foreign (35% Cash&Bonds)
88% Large / 12% Small(1%)-Mid(11%)
12% Growth / 56% Value

As a result, I think I will change my allocation to this:
15% American Mutual AMRMX
20% Growth Fund of America AGTHX
10% Capitol Income Builder CAIBX
10% EuroPacific Growth AEPGX
35% Small Cap World SMCWX
10% New World NEWFX
The analysis splits out like this:
40% Domestic / 43% Foreign
61% Large / 39% Small-Mid
41% Growth / 37% Value

This will change the way I redistribute my current portfolio.
10% AMCAP Fund ==> New World(10/10)
15% American Balanced
==> EuroPacific(10/10)
==> Small Cap (5/35)
15% American Mutual - KEEP (15/40)
15% Capitol Income Builder - KEEP (10/40)
==> Growth Fund of America (5/20)
15% Income Fund of America
==> Growth Fund of America (15/20)
15% Investment Company of America ==> Small Cap (15/35)
15% Washington Mutual Investors ==> Small Cap (15/35)

This might just work. Now if I can only remember to fill out the paperwork.

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Changing Up My SIMPLE-IRA Portfolio

I've been listening a lot to the Sound Investing podcast by Paul Merriman. It has been real informative and I have to say I'm starting to buy what he is saying. What Paul and the rest of the Sound Investing crew advocate is diversification, and one should spread their portfolio among the available funds that would best represent the most profitable sectors of the market. Towards that end they have set up FundAdvice.com where you can find what they call their "Ultimate Buy and Hold" portfolios, with variants for a variety of fund families and ETF's. At least that is how I understand it.

I have already talked about opening my Roth IRA with T. Rowe Price. Lucky for me, TRP is one of the fund companies represented at FA. Unluckily for me, TRP's Growth Stock was not one of them. But it seems to me to be a good strategy for diversifying my Roth and possibly Traditional IRA holdings as I build them up. I have also talked about wanting to ramp up my personal IRA contributions at the expense of my current SIMPLE-IRA contributions, which I intend to scale back.

Why? Because my SIMPLE-IRA plan at work restricts me to American Funds which carry a load. Our company has a large enough of a contribution pool our loads are down to 2.5%. But still that seems enough of an incentive for me to convert these contributions to my own no load IRAs. Which is another thing that Paul and gang advocate (no-load funds).
But what should I do with the funds that are in it? I don't want to take them out because it will impact the current loads for everybody including myself. Also I need to make sure that I properly allocate the funds I will continue to make contributions to in order to get the employer match.

I have recently figured out that my current portfolio is weighted very heavily towards domestic large value companies. Not a bad horse to hitch your wagon to, but not exactly diversified either. What Paul and the FA gang advocate is diversifying between domestic and international, small cap and large cap, which my own portfolio is most certainly not. But FundAdvice doesn't have an American Funds portfolio because they don't recommend loaded funds.

Well, I found the answer on Paul Merriman's personal blog, Merriman on Money. On it he answers a question from a reader who is also stuck with American Funds but at least doesn't have to deal with the load. On it he recommends the following allocation which in the following months I am going to try and match my portfolio up to:
20% American Mutual AMRMX
20% Growth Fund of America AGTHX
20% EuroPacific Growth AEPGX
30% Small Cap World SMCWX
10% New World NEWFX
My Current Portfolio (as withheld, not as currently allocated from growth):
10% AMCAP Fund AMCPX
15% American Balanced ABALX
15% American Mutual AMRMX
15% Capitol Income Builder CAIBX
15% Income Fund of America AMECX
15% Investment Company of America AIVSX
15% Washington Mutual Investors AWSHX
Of these funds that Paul suggests, the only one that I only currently own is American Mutual. I may keep Capitol Income Builder as part of the 40% that he allocates to American Mutual and Growth Fund of America, because I just like it and I think it covers pretty much the same asset classes as those funds. Perhaps a future post could explore that position.

But what is totally apparent without even doing some fancy MorningStar X-Ray thing on these funds compared to my current portfolio is how small caps and international are obviously represented in his suggestion and totally absent from my current funds.

So I believe reallocation is in order. What I could do:
10% AMCAP Fund ==> New World(10/10)
15% American Balanced ==> EuroPacific(15/20)
15% American Mutual - KEEP (15/40)
15% Capitol Income Builder - KEEP (15/40)
15% Income Fund of America
==> Growth Fund of America (10/40)
==> EuroPacific (5/20)
15% Investment Company of America ==> Small Cap (15/30)
15% Washington Mutual Investors ==> Small Cap (15/30)

For a final Portfolio of:
15% American Mutual AMRMX
10% Growth Fund of America AGTHX
15% Capitol Income Builder CAIBX
20% EuroPacific Growth AEPGX
30% Small Cap World SMCWX
10% New World NEWFX

Hopefully, this will properly allocate my SIMPLE-IRA into representing the right asset classes. Exploring this might make a good future post as well.

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Thursday, November 01, 2007

"The Incident"

I haven't posted anything in a while as my hands have been a little achy and I didn't want to overdo my typing while off the job. "Need that cash to feed that jones" after all. But for my own personal journaling I wanted to write about something that recently happened to me. I will call it "The Incident".

Last weekend we had our good couple friends over, J & L I will call them. I think married people reading this can appreciate that there are some people who fall into the "couple friends" category that you treasure. These are those rare couple where you like him and she likes her, and you can spend a good time together and everybody is friends.

We are lucky to have such friends and we really love them. We hang out often and its great that I am comfortable enough to enjoy a pleasant conversation with his wife, and him with mine and we are all just good friends. I value their friendship almost enough to call it an asset.

So the other night we were just hanging out, and we all had had a few beers, and to be course I had gone to the bathroom to make room for more. It was after all Friday, and we had our "drinking pants" on. I came out and walking back into the room, being the sorta frisky guy that I am, I gave my wife a little slap and grab on the ass when I came by her standing in the hallway. Now, my head was down at the time but it only took me about two steps to come to this realization: that wasn't my wife's ass.

It wasn't really the feel of it or anything that clued me in, it was a much too quick and fleeting an experience to have resulted in a positive qualification of that fact based upon previous handling, or rather lack their of, as it happened to be. It had been after all an almost reflexive action upon an impulse that just popped into my brain at that particular moment. It was the mounting horror at the realization when I THEN remembered who had been standing in the doorway of the room that actually clued me in.

It was not my wife, it was good "couple friend" L, the esteemed Dr. L. I thought "Oh shit, J is gonna kick my ass!". But I immediately turned a very dark shade of beet red and started apologizing. I was positively and absolutely mortified by this little chain of events to be sure.

But that is the great thing about great friends, if they are worth keeping the small and casual infractions are quickly forgotten (if they are rare enough). They knew how out of character it was for me to just casually grab a woman-not-my-wife's butt and that it was totally an accident. After all, you just can't fake that freaky combination of shame, embarrassment and stupefying laughter-fit that follows such an absurd circumstance when that is the case.

I'm so glad that J & L saw it that way too. When you are married or seriously coupled, it really means something to find other couples you can relate to together. We are very blessed to have met J & L. And if I can refrain from grabbing my good friend's ass in the future, hopefully they feel the same as well.

It's just that now all of our friend's wives are on the alert that I am a molesting ass grabber and they, to their credit, are quick to bring it up, perhaps as some prophylactic measure against it happening to them. I can only assume that is the case. Such now is my bane in life.

To that end I can only say: There are much worse fates to be had. ;-)

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