IRA investing for 2006

When it comes to investing in my IRA every year, I procrastinate. So I am in the process of contributing for tax year 2006- you can contribute to an IRA up until tax day for that year- so I can contribute up to $4000 anytime before April 15th. Actually in Massachusetts, I have until the 17th because of the timing of patriots day. I am not sure how this works exactly- does your brokerage have to receive the deposit before the 15th/17th? Or does the deposit need to be initiated? Will my brokerage accept a deposit on Patriots Day? I am a procrastinator, but I am also too lazy to figure out the details so I will not wait until the last minute, I will contribute now and not worry about it.

And while I procrastinate about pulling together the money to put into an IRA account, I do not put off investing the contribution since I am never going to build a sweet retirement for myself with all my retirement funds sitting in cash.

Also, several people have asked me recently what I recommend investing in. I do not feel comfortable recommending specific investments for specific moments in time. So instead, I will share what I am planning to do. I do not recommend buying the same things I plan to buy since I am buying them specifically to balance against what I already own. But I feel good about all the holdings I am hanging on to after I rebalance and am happy to share my choices if it helps others learn about some of the options out there...

I have more than one IRA and when I contribute each year, I try to look at them all at once to see what I am invested in and what to change to keep a diverse balance. I do this by copying all the holdings from each IRA into a spreadsheet and look up the current category for each holding on Morningstar, Here are the combined investments, organized by category and listing each specific holding and the overall percentage each holding represents:

Three things stand out right away:
  • Almost half of the investments are in large domestic companies
  • There is very little invested in foreign companies
  • I have several very small positions in a number of Janus mutual funds.
I also notice that most of my large domestic investments are in index tracking securities and everything outside of this category is in funds with managers trying to beat their respective indexes.

So as I decide what to invest my 2006 contribution in, I aim to:
  • Reduce my percentage investment in large US companies
  • Increase my investments in overseas companies
  • Clean up some of the clutter
  • Diversify between index tracking securities and actively managed funds across more categories
This may sound complicated and expensive, but it really isn’t. Here is exactly what I aim to do:
  • Sell my positions in JAGLX, JAGTX, JAMRX, and JAWWX (which has lagged its peers) to clean up the clutter.
  • Add to my investment in JAGIX to add a little more active management to the investments in large US companies.
  • Invest in VWO, EFA, and EFV all foreign index funds both increasing my international exposure and balancing against the actively managed foreign fund I already own.
  • Invest in MIDSX to slightly increase my specialty interests.
  • Invest in VBK, VB and VOE to increase my smaller company investments and again balance against the actively managed funds I already own.
Here is what my new IRA portfolio will look like:

Now I have more coverage of mid/small sized companies. I have managed funds and index funds, across many categories, No individual investment is smaller than 2% and the largest single position I have is 13% down from 15%. And I have more international and specialty coverage offering more diversity from the large US focus I had before.

Also I am more diversified across fund companies. I think this is important because even when different funds at the same company focus on different sectors, it is often the same pool of analysts or same analyst strategy that is informing the various fund managers. Also, as companies struggle or do evil things, using a variety of companies reduces risk from these things as well.

So now I have holdings from Janus, Vanguard, Fidelity, Artisan, T Rowe Price, iShares, Columbia, State Street Bank (they manage SPY), American Century, Wells Fargo, and Stratton and Boston Properties.

All this diversity- across sectors (company size and growth vs value), strategies (index vs managed), and companies should mean that I am exposed to less risk in general but am still positioned to make gains if any for these sectors due well.

So how much will it cost? All my IRAs are with etrade and have no account fees. All the mutual funds I am buying and selling are no-load, no-fee funds so no costs there either. My pricing for buying ETFs through etrade is $7.99 per transaction so the grand total I will pay is $47.94. I will post when I actually execute this plan.


McSaturn said...

I like your charts. Your charts make me happy. May your charts live long and prosper. May your investment advice and financial stewardship be forever true and wise through the power of your comprehensive charting.

Jouissance said...

Thanks mcsaturn! I fell obligated to point out that my charts are glad they make you happy but they are not representative of values if held in Quatloos.

I have yet to find a Quatloo to dollar converter. If I do, I will post about it. Until then, here is a song to keep your happy feeling alive!