Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Wednesday, September 29, 2010

DIY Newbie-Portfolio Analytics-Part 2

Yesterday we ended up with the model selection provided by Schwab. If you are going to manage your own money, it is important, I believe, that you go through this process with your own broker (whether it be TD Ameritrade, Fidelity or whomever). The fact that all of this is free and at your fingertips is a benefit that wasn't available until fairly recently. The model selection is

(CLICK TO ENLARGE) Model selection is critical. It defines your risk tolerance. It has to be an allocation that you have to stay with pretty much through thick and thin. You are going to ride it through some really choppy waters. Spend time with them, think about them, and pick carefully. Can you change models? Sure-you just don't want to be changing frequently. In particular, if you go to a more conservative model every time the market hits a rough patch and vice-versa, it obviously defeats the purpose.

Notice that, as you move left to right, you move from most conservative to most aggressive. Notice that each model has a time horizon listed. Notice that each model has comments about your ability to withstand volatility.

Let's pull out the "Moderate Plan" and take a closer look:(CLICK TO ENLARGE). The important information is the model's portfolio allocation. This model is basically 60%stocks/40% bonds, with 5% of the bond position in cash. Notice that "large cap" is targeted at 35%, "small cap" at 10%, and "international" at15%. As stated, these are targets. You have to come up with a rule to determine how much deviation from target you will tolerate. 5% is the typical allowable deviation. When a sector gets more than 5% away from target, either over or under, the portfolio is rebalanced.

Tomorrow we'll look at an actual account, see how it is positioned relative to its model, and figure how to bring it back into balance.

Disclosure: I am a Schwab client and have clients that are Schwab clients. I do not get compensated in any way from them. The only compensation I receive is from my clients.


  1. This stuff from Schwab looks pretty handy.

  2. It is. The problem is that it looks a lot more complicated to most people than it really is. I think it's a great tool. 25 years ago I started each morning calling 8 brokers to get Treasury bill rates. Now complete portfolio management systems are at our finger tips - for free!

  3. Actually previous comment was me - DIY. Apparently comments are more complicated than the portfolio management system.