This "Crisis" was no Surprise

Just in case you thought no one saw this coming...

This video is from Tuesday, 8/28/06.

Note the Dow at 11352 and the S&P 500 at 1301. Dow is now at 8353 and S&P 500 is at 869.

Peter Schiff had it right, at least until the end of the video when he rambles a bit making claims based on gender stereotypes... His opponent, Art Laffer provides great cominc relief if you are able to laugh about all this.



Thanks Dave for forwarding the clip!

What I'm Doing as an Investor During the Financial Crisis

As the economy has turned south, I've been asked if I think it is a good time to cut back on retirement plan contributions. A friend recently moved all his retirement account investments into bonds. Investors pulled out of mutual funds in September in greater numbers than in any time in the history of the mutual fund industry. What is an investor to do?

I have a long time horizon until retirement, and I can leave my taxable investments in the market for a while. So I am following Warren Buffet's lead and am buying.

I'm doing four things.

1) I'm re-balancing my retirement account to be 100% Equities and increasing my small cap growth and large cap value investments.


I was already 90% invested in equities so this is not a huge change. I moved out of bond funds, which have certainly cushioned the decline in my retirement account. And I'm moving funds from an S&P 500 index fund into Dodge and Cox, a Large Cap Value managed fund. I have many years to go before I retire so even if markets decline further, I think being 100% in equities after 30-40% declines year to date, is a good plan for the long term.

2) I'm increasing my contribution to my employer based retirement plan (see above) from 13% of my salary to 16%. This is also not a huge change, but the more money I can invest while the markets are down significantly, the better.

3) I'm going through my taxable account, and looking for funds that I can sell at a significant loss. I will immediately reinvest in another fund in the same category, as I feel good about the asset allocation in my taxable account. But by selling at a loss and reinvesting, I maintain the same exposure to equities, I have a chance to replace funds that are not performing in line with peers in their categories, and I get to offset the loss against my income come tax day! I'll write a post with details about this soon.

4) I'm looking for cash to invest. Since I'm increasing my retirement contributions, my pay check will decline slightly. I have an emergency fund and though I already live comfortably below my means, there are ways I can cut back and save even more. So I'm looking to see if I can find cash to invest without depleting my emergency fund. More about this soon as well!

Portfolio Update 5/16/08: I'm On Fire

The WylieMoney 20 Mostly Managed portfolio caught spring fever in March and stated "I'm on Fire."

Remember how things looked back on March 7th, 2008?:


Back then, the WylieMoney Mostly Managed portfolio was -4.05% since May 1, 2007 and -7.35% year to date. This Friday, the WylieMoney portfolio was up 5.39% since May 1, 2007 and up 1.62% year to date. I'm not tracking from the lowest point to the highest only comparing the values I documented in these weekly updates (scroll to the bottom).

Trying to time the market is impossible. Who would have thought with oil spiking to $126 a barrel, continued trouble in housing, news reports about financial aid for college drying up, and personal credit issues coming to the forefront, that diversified portfolios would gain about 10% in just over 2 months?

Despite the weakest 1 week performance of the bunch, The WylieMoney 20 Mostly Managed portfolio has the highest return since this experiment began and the best return year-to-date.

It is interesting to note that the WylieMoney Slowly portfolio which invested in many of its funds when the markets were lower than May 1st, 2007 is still underperforming the WylieMoney 20. It would have been better to invest all $50,000 on May 1st 2007, despite the ugly ups and downs of the past 13 months, then try to dollar cost average into the same funds over that same period...

At least using these funds, over this time period, both indexing and dollar cost averaging have proven less successful than picking a group of mostly managed funds, and riding out the storm.

WylieMoney 20 Mostly Managed

WylieMoney Slowly

Lazy 20 Mostly Index

Three Fund Index

ETF 20

S&P 500

Next WylieMoney Pick: Harbor International HIINX

The next fund I will add to the "WylieMoney Slowly" portfolio is a Foreign Large Cap Value fund. I have hypothetically invested $2500 in one fund per month since I started this experiment last May.

Click on the image below for a larger view.

• Mid Cap Blend NTIAX Columbia Mid Cap Ind My Post I 1
  
• Global Equity JSVAX Janus Contrarian My Post M 2
  
• Bond Gov. Long BTTRX American Century Tar My Post M 3
• Large Cap Growth JAGIX Janus Growth & Incom My Post M 4
• Small Cap Value BRSVX Bridgeway Small-Cap My Post Q 5
• Foreign Large Growth JAOSX Janus Overseas My Post M 6
• Mid Cap Growth BPTRX Baron Partners My Post M 7
  
• Large Cap Blend SLASX Select American Shares S My Post M 8
• Specialty Real Estate - SSREX SSgA T. Act. REIT My Post M 09
• Large Cap Value - AAGPX A. Beacon Lg Cap Val My Post M 10
• Small Cap Growth - BGRFX Baron Growth My Post M 11

The 12th category I picked for the original WylieMoney Portfolio was Foreign Large Value so it is the 12th fund I will add 'slowly.' And as I do each month, I look to Etrade to see if a better option than I originally picked, HIINX Harbor Intl My Post, is available.

I'll save you some suspense. HIINX is still the best.

Lowest Turnover Ratio by a lot meaning likely lower Capital Gains distributions, which is key to keeping taxes low in a taxable account.


Tied with two additional options for the highest star rating- 4 in this case. Not the lowest Expense Ratio, but not the highest. Longest Manager Tenure meaning that performance was achieved with the folks currently in charge.

And what a performance it has been. Only one other fund has come close to its three year performance and that fund has higher expenses and almost three times the turnover.


So on the first day in April that markets tank, I'll add HIINX, Harbor International to the WylieMoney Slowly portfolio.

Reinvesting dividends and capital gains in a taxable account

Up until now, I had all my mutual fund dividends and capital gains distributions set to automatically reinvest in my taxable brokerage account.

This creates a bit of work when it comes to calculating the basis on my holdings when I sell a fund, but I don't mind. And with online brokerages, it is not much work at all. Etrade keeps track of the basis and I assume other brokerages do too. So as long as I note the basis before I sell and the holding no longer shows in my portfolio, and the records are accurate for holdings I bought before I started using Etrade, there is no work to do at all.

There are four reasons I turned off automatic dividend reinvesting, anyway:

1) If you sell a no-load no-fee fund within 90 days of purchase you are penalized a fee of $49.99. I do not know that this applies to automatic reinvestments (I assume it does), but I'd rather not worry or risk the hassle.

2) If I think I want to sell a fund, I typically don't add anything to it for a year before I sell so any gains are taxed as long term gains. I have two funds I have not been adding to since last June, thinking I might sell after my last addition to the funds is a year ago or greater. In December the funds distributed and reinvested automatically. This complicates the tax implications of a sale unless I now wait until next December which has slightly agitated my calm.

3) I invest regularly adding small amounts to some holdings to keep my overall portfolio balanced as I want it. Taking gains and distributions as cash and manually adding them to the funds I want to gives me more control over keeping my overall portfolio in balance. For some people (those who would let the cash sit) this might not be a good idea, but I have seen that I regularly take the cash I save in my brokerage and invest it, so this should work well for me.

4) Even though Etrade keeps good records of all my purchases, when Etrade bought my previous brokerage, the old electronic details did not convert over. I assume if Etrade goes under or another firm buys Etrade, or I end up with a new brokerage for any reason, the balances will transfer but the details about my basis will not. Sure I can keep track of everything myself, but to do so is more hassle than it is worth.

If you have an Etrade account that is not a retirement account, or even if it is a retirement account, and you want to un-enroll from automatic reinvesting, simply go to the online service center and type in a request to customer service for them to make the change. For mutual funds, you cannot do it yourself through their interface.

I left my Roth IRA alone so it still automatically reinvests. Since I only add to the IRA once a year, and I cannot add enough to rebalance all the holdings by adding to the market sectors that trailed the year before, and I don't have enough in the IRA for the dividends and distributions to be significant, and the IRA is not taxed like a non-retirement account, it make sense to me to allow the dividends to reinvest.

On an unrelated note, check out the Coyote I saw romping around in the snow in my driveway the other day!

Today is the day I'm adding SLASX: Selected American Shares

Today is the day I'm adding SLASX to the WylieMoney Slowly hypothetical portfolio. I'm not
actually adding money to any real funds since I have not had time to research which ones have and have not paid capital gains distributions.

Why buy a fund today (placing the order before 4pm!)? Read here.

Bridgeway Small-Cap Value added today!

Today, being the first significantly down day of the month, is the day I will 'hypothetically' invest in the Small Cap Value pick: Bridgeway Small-Cap Value N BRSVX for the WylieMoney Slowly portfolio. I'll add a Foreign Small/Mid Cap Growth Fund in October.

Poll: Is now a good time to invest?

If you haven't voted yet, take you pick! The poll is on the menu on the right.

Ben Stein's view gave me a chuckle...

...the stock market is cheap on a price-earnings basis, profits are fabulous, Mrs. Clinton and Mr. Giuliani are far from being socialists and in the long run, both here and abroad, stocks are a lovely place to be. I have no idea what the S&P will be ten days from now, but I am confident it will be a lot higher ten years from now, and for most Americans, that's what we need to think about. The subprime and private equity and hedge fund dogs may bark, but the stock market caravan moves on.

Of course my poll does not include anything you would actually want to consider when investing. Things like:

• how long can you leave your investments alone?
• what is your risk tolerance?
• ummm, invest in what?
• etc

But that's ok, its only a poll on a blog!

I told you I loved this market!

At the end of my post yesterday, I said "I am loving this market these days." Today, on my lunch break, I invested a little more (real money, not hypothetical). By 4 pm everybody else jumped on the bandwagon and the market recovered from another huge loss to close basically flat. I had hoped it would stay down, but oh well.

Now, I'm no expert, but what I see is continued strong profits, largely due to increased productivity, which I attribute to companies finally making good use of faster computers and decent software. The economy is chugging along, overseas markets are doing great, emerging markets still have tons of room to grow as more jobs land there, building new generations of workers with money to spend, etc, etc.

A certain number of our neighbors lied to themselves and their mortgage brokers about how much house they could afford. Many of them signed up for adjustable rate mortgages that they were told would go up in a few years. A few years passed, and their loans went up- probably on the low end of what they were told, given that interest rates are still very low,- and now they can't pay. To them I say, deal with it.

I'm sure there was some fraud, and I understand much of the concern around how mortgages are sold to Wall Street so fast that brokers have no incentive to confirm that buyers aren't lying. This is not cool and something should be done.

I'm also sure there are some who stretched just a little and bad things happened- layoffs, sickness, life, etc. and now they can't afford their homes. To them I say, I'm sorry. I hope they can turn their finances around and get back on their feet.

The question investors have to ask is- how much of an impact will all this have on global markets?

My guess is, not as much as the recent sell-off would suggest, and that is why I invested. Also, my sense is that valuations on stocks are reasonable, overall. Morningstar calculates that the markets are undervalued:

but you only have to look back to the early 2000's to see that things can get a whole lot worse...


But I think that the steep decline after 2000 was a reaction to ridiculous valuations and I do not believe that valuations are ridiculous or where earlier this year, so I see the recent quick sell-off as a good opportunity to invest. If only I had some extra cash!

Off course, I could be wrong.

I'm adding JAGIX to my hypothetical portfolio today

I'll write more later tonight, but today is the day I will add $2500 in JAGIX to the WylieMoney Slowly portfolio.

Etrade, don't do this to me!

Arrrrggghhhh.

On this site I have put together a pretty detailed hypothetical portfolio available for purchase through Etrade. I have not gone into great detail about if I would actually buy these funds if I could or if I own any of them.

I do own some of them but I do not own all of them. Some of the categories I researched here, are categories for which I already own a Mutual Fund that I bought years ago. Even though the fund I picked for this hypothetical portfolio might look a little better than the fund I own, it is not worth it to me to sell my fund and pay the capital gains tax and then invest the leftover money in a new fund, at this point in time. Also I do not own funds for each of these 20 specific categories.

One of the funds I do own is SSGA Emerging Markets SSEMX. I bought it back in May of 2006. I have also managed to save enough to add $100 to my initial investment at a couple of points since then (not every month though!). Since I bought it, my holdings in this fund have increased 27.46%! Not bad for one year.

This is a risky fund and that risk has been well rewarded over the short term. I imagine it is only a matter of time before Putin does something so un-democratic that western investors balk and sell Gazprom in droves or China's speculators finally try and jump ship or Chavez convinces the rest of South America to 'reclaim' their private businesses. I do not know what it will be, but something will send emerging markets into a downturn.

In fact, yesterday, SSEMX was my second biggest loser down -2.03%. My biggest loser, if you're curious, was PNRZX. If you click that link, you'll see that PNRZX has been on fire over the last 5 years. I personally have only gained 10.30% since buying in just over a year ago. Not too bad, but not great given the recent gains I missed out on. My only fund that increased in value yesterday was BTTRX, a WylieMoney pick, up 0.14% on the day.

Even though I do not think it necessarily the best time to buy an emerging market fund specifically, I did try and add another $100 to my holding several days ago and was denied.

The entire reason I bought this specific fund and recommended each of the WylieMoney funds over sometimes better funds in each category is the $100 minimum for additional investments. I am still trying to figure out what happened here, but the last time I added $100 to this fund was in February. Now the minimum that Etrade is letting me add to my holding is $1000. So something changed in the last few months. Despite trying to save and invest as much as I can, I cannot afford to add $1000. And I should not have to darn it! Here is what Morningstar claims the fund allows:


What I suspect happened was that SSEMX changed its 'Additional Minimum Investment' to $1000 recently. You can see above it is $1000 now- I do not remember if it was that way before February. Fine. Gone are the days I can add $100 whenever I have the $100 to add and think the timing is right. I am willing to set up the Automatic Investment Plan or AIP for this. The Additional AIP minimum is listed as $100.

Etrade allows you to set up an AIP that invests in a few different intervals:


If I can come up with $400 a year to add to this fund, I could choose the "Quarterly" option and be all set, right? Not so fast! Here is a picture of the option I get when trying to set up the additional AIP investments:


So I called Etrade and here is what they tell me. Despite the fact that I already paid at least an initial $1000 when I first invested, to set up an AIP now, I have to pay another $1000 before I can reduce the AIP investments to $100. Since you can start and stop an AIP at anytime, this leaves me wondering if I should not have just bought the fund through this screen and set it up with an AIP plan for once a year that I never intended to make on that schedule and then just adjusted the frequency and amounts as desired.

But this does not make sense. I should not have to pay different amounts based on which screen I used to buy the fund. Does this make sense to anyone else? Do all brokerages and funds that have different minimums for AIPs and and non-AIP subsequent purchases make you pay a separate 'Initial Investment Amount' to both buy the fund initially and then set up the AIP as well?

This is not what is going on at Etrade either, at least not consistently. Another WylieMoney recommended fund I own is American Beacon Large Cap Value Planahead AAGPX. Here are the details for this fund from Morningstar:



So to set up an AIP to automatically invest $50, I should have to first pay another $2500. But I don't. Here is my option in the drop down menu:


I'm going to try approaching Etrade again and see if I can find out more.

When to buy Mutual Funds Part III

In Part I we pondered the issues involved in deciding when to invest. In Part II we looked at a few tools and discussed some strategies to help gauge what shape the market is in. In part III we will work out a system to invest in the wylie hypothetical portfolio of 20 mutual funds.

To make the initial investment in the 20 funds I am picking, I would need $50,000. Many of these funds have $2500 initial investments, so I plan to make a hypothetical initial investment of $2500 across the board to keep things simple. Hey- it is only hypothetical money, after all.

If I was investing my hypothetical $50,000 and it was mid to late 2002, I would invest it all right away. Indeed, in 2002, I did invest the savings I had set aside to invest, as soon as I was sure I could leave it invested for a while. I wish I had $50,000 real dollars to invest in a portfolio like this at that time as many of these funds are way up over the last 5 years.

That said, I do not think today is a terrible time to invest but also it does not feel like the best time either. So to invest my $50,000 hypothetical dollars, I will invest $2500 in one fund at a time, once every month. This will spread my initial investments out over almost two years.

I also plan to invest all $50,000 in a separate portfolio, right away and I will see after the fact which approach was better.

Once I make the minimum initial purchase for each fund I will add $100 to each fund or $2000 per month into the entire portfolio. And I will keep an eye on the market and the first day each month that markets are down about 1%, I will make that subsequent purchase. Etrade actually lets me do this for now. The $100 minimum for additional investment into mutual funds is often listed as being contingent on setting up an Automatic Purchase Plan, but I have found that I can pick the day myself and make the purchase manually for mutual funds I own (which again is not all 20 of these!).

I will invest these funds in two hypothetical portfolios in Morningstar's portfolio tool, unless I find a better one by next week.

Now some of you are saying- "I do not have $50,000 or $2000 extra a month to invest so what do I care" I tried to pick funds in a specific order such that one could invest any amount between $10k and $50k and still employ a system like this one. For example one could put $10,000 in a wylie portfolio of 4 funds. Then, if one could save $400 hypothetical dollars every month or every other month or even every quarter, one could still use this system- though there is no guarantee you won't lose gobs of money so do your own research and take responsibility for your own investments!

I'll try and work out how hypothetical portfolios of fewer funds perform as well.

Finally, I want to compare my list of Etrade's best no load no fee mutual funds (in my opinion!) against a similar portfolio consisting of Vanguard index funds and also against a portfolio of ETFs.

If all the work I did picking mutual funds does not lead to a portfolio that outperforms what could be easily done with simple index tracking, that will be good for me to know when I do have $50,000 real dollars saved up after I stick with all our tips for living cheaply!

So to do this, I need to finish picking the 20 funds. I hope to set up the portfolios starting in May so expect a few more posts soon!

When to buy Mutual Funds Part II

In part I we discussed the difficulties involved in choosing when to invest. Now I will talk about a few strategies for timing investments in mutual funds. These strategies may be no better than reading the almanac or having a blindfolded monkey throw darts at a list of stocks. Regardless of whether these strategies are better than monkey darts, they provide me with an approach that takes the emotion out of the decision of when to invest which has its own value.

When everybody is selling and has been selling, it is often a good time to buy. Motley Fool wrote a nice article about this notion. Buying mutual funds on a dip is a little trickier than buying a stock on a dip. When you buy most mutual funds, you buy shares at the price of the fund as of 4 pm on the day you make the purchase. So if 3 pm comes around and the market category you are investing in is down 2% for the day, you can place a buy order and you will buy shares of a fund in that sector at a price close to 2% lower than had you bought them the day before. Of course the fund itself won’t be down 2% exactly unless it is an index fund, and even then it won’t be the exact same, but typically if the category is down, the fund will be down. Now there is nothing to say the market sector won't go down another 2% or more the next day, but if you are going to buy, buying at a slightly lower price than the day before seems like a good idea to me. My sense is that when sell-offs happen, momentum often drags good companies down with the bad so if your fund manager is making good picks and the value of the fund takes a hit from some panic selling it is a good time to buy.

Tip one: Invest on a dip.

Another concept is: money moves from sector to sector as certain kinds of companies go in and out of favor among traders. For the most part, I am not looking into ‘sectors’ with the hypothetical portfolio I am putting together on this site. Recently, Financial, Technology, and Health sectors have lagged behind Natural Resources, Utilities and until recently, Real Estate which have been on fire.

I have been choosing funds for the Wylie portfolio among Growth and Value businesses across companies of all sizes. But even in these ‘categories’, some go up while others go down. So if you have money to invest, it is not a bad idea to see which category has lagged behind. If you invest in sectors, the same concept applies.

One easy way to find out how sectors or categories are performing is to use Morningstar's free list of performance by category. This list mixes in what I am calling categories and sectors. There are many ways to build diverse portfolios, but you gotta pick one if you are going to get started and I picked categories (Large Growth, etc.).

Tip two: Invest in categories that are lagging behind.

Another thing to consider is that stock prices are generally based on some combination of how a company is doing and how investors think the company will do in the future. But investors use all sorts of different formulas to determine how profitable a company really is and to guess what impacts new products or ideas will really have. The way accounts 'expense' stock options as part of employee compensation, how the iPhone will boost or detract from Apple’s free cash flow... who knows? Part of why I am looking at mutual funds is I do not have enough time to analyze or stay on top of enough individual companies to build a good diverse portfolio.

Morningstar, pays lots of people to try and do this though, and they have a specific approach to calculating what they call Fair Value Estimates. Then they take these values and track indexes to determine if the markets those indexes track are fairly valued. Finally, they share this information for free. In part I, we looked back and saw that not buying because stocks are overvalued can lead to missed gains, but when the bubble popped, extremely high valuations were a sign that some heeded ahead of time and they were happy they did. I wish Morningstar's tool actually tracked valuations by category and included international companies as well but you get what you pay for I guess.

Tip three: Invest when markets are undervalued.

So we have three gauges to help identify good times to invest.

The general concept is, when the US market is broadly undervalued, identify which market categories specifically have underperformed and on a specific day when the market is down a good bit, buy.

No one tip or even all three will enable you to identify the perfect time to invest. Part III of this series will look at how to hypothetically jump into a Wylie portfolio like the one I am putting together on this site, using these three general ideas in a systemic way.

When to buy Mutual Funds Part I

It is often said, "You can't time the market."

What does this mean?

In general it means you never know what will happen tomorrow.

If you thought the market was ready to slump after its nice run up before 1999 and not invested in the beginning of 1999, in some cases you would have missed the largest one year returns we may ever see in our lifetime. Data courtesy Yahoo Finance for Janus Global Technology fund:



By all accounts, many of the stocks in this fund were trading at prices way above historical averages given what the underlying companies were earning, even before they proceeded to double in value in less than a year.

Stock prices and therefore fund prices are not driven by fundamentals, but by what people are willing to pay. Many people determine what they are willing to pay based on fundamentals, but many people do not. And in either case you still have to guess how you think the economy will do in the future. Had you invested at the beginning of 2000 thinking that this is a new economy and historical valuations do not apply because technology is going to enable corporate growth to expand at levels never before imagined, you would have been very sad by the end of 2002. Again consider Janus Global Technology:


Since 2002, markets around the world have gone up, almost across the board. Small and large company stocks have increased. Growth and value oriented companies have done well. Historically when oil prices have soared, economies have struggled as the added cost of manufacturing and transportation have been factored into the price of goods, lowering sales or reducing profits. Recently this has not been the case as companies across all sectors have grown and earned significant profits. Some claim tax cuts in the US are the cause, but European markets despite much higher taxes have trounced American markets so I am hesitant to attribute any single factor to these trends. Despite a long run of gains, stock price valuations are nowhere near as high as they were in 2000. So what does all this mean?

Beats me, I'm a philosophy major.

Some claim that current valuations are too high as they are calculated anticipating that above average growth will continue for a while which is possible, but unlikely given historical trends.

Some think the economy is ready to pick up steam. Would you trust this guy?


Others say things are not good, not bad.

One of the reasons the hypothetical portfolio I am creating here only holds funds that allow $100 or smaller subsequent investments is to not have to figure out how to time the market. My thinking is that if I buy a fund and contribute $100 every month, every 2 months or once a quarter, the exact timing of each purchase will not have a significant impact over the long term as the cost of the overall holdings will be the average of each purchase through up and down markets. If the sector the fund invests in grows and the fund managers make good picks, I should come out ahead.

I agree that you can not time the market, but you do have to determine a time to make the initial investment. And no advice works in every situation. If you had cash to invest in January 2000, the notion that you can't time the market so just buy when you have the cash, would not have been good advice. So even though I agree with the claim that you can't time the market, there are, good and bad times to invest and more importantly good and bad strategies for investing. And even if you buy into the Wylie idea of regular contributions, you still have to make the initial purchase which for the funds I am looking at are often a minimum of $2500.

So even though you cannot predict how markets will perform there are a couple of tools out there that you can use to see if it is a good time to buy or not and hopefully avoid buying at a market peak.

In part II I will talk about these tools and lay out a strategy for hypothetically investing in the Wylie hypothetical portfolio. Then I will pick the last few funds necessary to round out the portfolio and begin tracking the performance of the portfolio.

The Wylie portfolio vs Lazy and Kevin!

After yesterday's sell off, I went back and looked at the one day performance of my recommendations compared to the lazy portfolio. I anticipated that my managed funds (Well the NTIAX is an index fund but the others are managed) would have under performed Vanguard's low cost index funds. Now let me be clear- this is not an apples to apples comparison. My allocation is not invested in the same categories as the lazy portfolio. But if somone came to me and said- "I want to invest $10,000 in some mutual funds.., any funds worth researching?" These are the one's I would think about...

After realizing my funds did not lose as much, I ran the numbers on Kevin's actual allocation too.

I am not sure what this indicates exactly- the Vanguard funds invest very broadly so maybe this simply means that yesterday's sell off was very broad and that my funds were a little better positioned for this round. All my stock funds did better than the Vanguard stock funds but the real difference was my bond fund which is a not at all like the broad Vanguard bond fund of the lazy portfolio.

Anyway- not much use in looking at daily performance of funds for the kind of investing I am exploring- except to be sure you can stomach some sadness.

Market Timing and Mutual Funds

Many financial analysts and advisor types claim market timing is a bad idea... I agree that if you look at an individual company that is performing well and is valued cheaply, buying it regardless of market trends, as a long term investment makes sense, but this does not necessarily apply to decisions about when to invest in mutual funds that focus on specific market sectors. If the fund broadly covers companies in a sector and growth in that sector slows or the sector goes out of favor with institutional investors, the stocks of those companies could decline and the fund could lose money.

International markets have done really well recently, but is that any reason to not invest in them? Will emerging and international markets continue to trounce US markets?

Beats me- I'll leave that to the experts. But moringstar has a nice summary of performance by category and if I were choosing a category (sector), I would take a look at how it has done and consider the likelihood of that trend continuing.

I would not recommend basing an investment decision on this alone, but investing in a sector that has had a strong run does not make as much sense as investing in one that has not gained much over the last few years.

Which does make me rethink my IRA strategy.

Should I invest in sectors that are not as represented in my portfolio to diversify and balance, even if those sectors have had a good run for a long time? I'll have to think about that one...