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.

Monday, July 25, 2011

New Account Update

A short time ago,  I wrote two posts to describe the process of opening a new account and getting a portfolio up and running using low-cost index funds. This is the investment process that Warren Buffett, as well as many other long time students of the markets, recommend. It is an approach that minimizes fees, has historically outperformed professional managers, and most investors can carry out . The first post, "What You've Always Wanted to Know About Managing your Own Assets But Were Afraid to Ask" started the process by picking an asset allocation model. The second, "Choosing Investments," went into the process of selecting exchange traded funds to fit the selected model.

Since the posts,  markets have been volatile as European countries have struggled with a debt crisis and the U.S.  has faced a debt ceiling impasse, threatening default on U.S. Treasury debt. A huge positive of the approach used by the new account  is that it is very easy to follow ongoing performance. The alternative that most investors face is relying on their advisors to produce reports months down the road.

Let's look at the performance:

Source: Schwab

CLICK TO ENLARGE Note that the performance is for both the account, .89%, versus the benchmark index, 1.04%.
It is also easy to ascertain that the portfolio is positioned in conformance with the asset allocation by model.
Source: Schwab

As can be seen, each asset class is within 1% of target.

What does the portfolio actually look like?

Note that there are more holdings than typical in that low-cost Vanguard exchange traded funds were transferred in when the account was opened. The exchange traded funds added after the account was opened are commission-free and will be used to keep the account in balance.

When the account reaches the draw-down phase, the amounts will be taken out of cash which comprises approximately 10% of the account.  Also, at that time, special consideration will be paid to ensure that at least 60% of the annual income need is met with interest and dividends of the portfolio's assets.

The bottom line is that this is a process that, with some guidance, most investors can carry out on their own. Although Schwab was used here, other brokers offer similar tools. The process focuses on the important questions:  the appropriate asset allocation model and the appropriate asset sectors.  It doesn't sidetrack investors into the time-consuming, difficult, and, frankly, many times under-performing tasks of trying to pick individual stocks or time the markets.  It is an approach that historically has outperformed 70% to 80% of professional managers after fees are accounted for. It is an approach that is 100% transparent in an industry not known for its transparency.

Disclosure:  This post is for educational purposes. Investors should do their own research before investing. None of the funds mentioned should be construed as recommendations.


  1. The best part of this asset allocation strategy is that you won't get swayed by how the market moves. It is a lot easier to keep emotions in check.

  2. Gotta love those brokerages that will let you buy ETFs commission free, especially if you are a long-term investor.