Today is the day I'm adding Janus Overseas JAOSX

Today is the day I'm adding JAOSX, Janus Overseas to the WylieMoney Slowly Portfolio.

Here is why I am picking today.

Portfolio Update 10/05/07 Up 7.51% Since May

In the sixth month of competition between 6 mutual fund portfolios, the low cost diverse mix of Mostly Managed funds known as the WylieMoney 20 maintains its lead with an increase of 7.51% since purchase.

All the portfolios are in the green, despite sub-prime mortgage concerns.


The single best performing fund from all the portfolios over this period is SSEMX SSgA Emerging Mkt (My Post) which is up a whopping 34.29% since May 1st. The worst performing fund is an ETF, VOE Vanguard Mid-Cap Value which has lost 2.02% but is still up over 6% Year to Date.

WylieMoney 20 Mostly Managed Portfolio

WylieMoney Slowly

Three Funds Index Portfolio

S&P 500

ETF 20

Lazy 20 Mostly Index Portfolio

Do I recommend this strategy?

I recently summarized the history of my Mutual Fund Portfolio Experiment and was asked:

"Do I recommend this strategy?"

The answer to that is, "It depends."

When thinking about how to invest you have to ask yourself a bunch of questions: What is your risk tolerance? What are your goals? What is your time horizon? etc.

Here are some thoughts in general:

• I think looking at mutual funds is a good idea for a new investor as mutual funds offer a lot of diversity with little effort.
  
• Funds with low initial investment minimums let you buy more than one fund with relatively little money, offering even greater diversification.
  
• With the interwebs it is easy to find funds with low expenses and low turnover (which is important for investing in a taxable account).
  
• No transaction fee no load funds are good to consider since they are less expensive to buy than other funds.
  
• The funds I picked specifically allow $100 subsequent contributions for no fee so they are ideal for someone who wants to regularly contribute to their portfolio over time.
  
• If you do not want to regularly contribute to the funds over time, in many (but not all) cases, there will be better options.

So I won't recommend this strategy to anyone specifically because I do not know their specific situation AND I'm not an adviser. But I do follow a strategy similar to this one myself for the account I try and add to consistently.

This specific experiment is meant to explore the process of investing in mutual funds. By explaining this process and providing regular updates, I hope to learn and to demonstrate what the process of investing can be like. When you watch a diverse portfolio of low cost mutual funds tank, how do you react? When the portfolios don't keep up with specific individual indexes you care about, how do you feel? Hopefully this will actually provide some context for you to think about your risk tolerance.

This experiment is also designed to look at Managed funds, Index funds, and ETFs side by side and see how they compare. I personally think a mix of all three makes sense depending on your situation and your goals.

I know this answer won't satisfy some people who want to be told what to do. For those of you who feel this way, you should have no problem finding an adviser who will charge you a nice fee to do just that. I don't recommend it though! An adviser might be a good idea, but don't let anyone tell you what to do about anything! Of course, I just told you what to do so if you take my advice you ignore my advice. See why you don't really need to worry about what I think anyway?

What I am going to do is set up my actual investment portfolios in morningstar and try and compare how my accounts perform next to the hypothetical ones. While I can't answer the question "Do I recommend this strategy?" for you, I suppose I should explore the question-"Should I follow this exact strategy, myself?"

Janus Overseas Next Mutual Fund for the WylieMoney Portfolio

I have been adding a new mutual fund each month to "WylieMoney Slowly," one of the portfolios I track. This month I wanted to add a Foreign- Small/Mid Growth fund. The fund I picked for the original "WylieMoney 20 Mostly Managed Portfolio" (ACFFX Columbia Acorn Intl Sel My Post) is now closed so I cannot "hypoethitcally" invest in it.

It turns out Etrade has no other funds with a $2500 minimum initial investment in this category. So I checked for a Foreign- Small/Mid Value Fund and found none.

Truth is, this is not the easiest category to invest in. For the "Lazy 20 Mostly Index Portfolio", this category is one of the few that had no index option. And the fund I picked for it (Foreign Small Growth - VINEX Vanguard Intl Explorer), is also closed to new investors.

So my pick for this month will be Foreign- Large Growth fund and the option is clear:

JAOSX Janus Overseas My Post

Janus Overseas is hotter than the hottest hotness. More important, it has low fees and low turnover.

So the next day the markets get pummeled, I'll add JAOSX to the WylieMoney Slowly portfolio.

Portfolio Update 9/28/07 WylieMoney Pulls Away

When looking at the six mutual fund portfolios I track to see which has performed best, the graph speaks for itself:

Even on down days now, the WylieMoney portfolio is holding up. The 1.27% increase for the week was way better than the S&P 500 ETF, SPY which only gained 0.4%. Year to date, the WylieMoney portfolios have pulled even farther ahead of the mostly index fund portfolios that had, at one time, been in the lead.


Click on the image for a larger view:

WylieMoney 20 Mostly Managed

Three Fund Index

Lazy 20 Mostly Index

WylieMoney Slowly

S&P 500

ETF 20

Portfolio Update 9/21/07 WylieMoney on Top!

Of the six portfolios I track, the WylieMoney 20 Mostly Managed portfolio leads the way, having increased 3.7% since May. The Three Index Fund portfolio made up ground this week. Friday was the only day last week that the major US market indexes where up and the WylieMoney portfolio gained more than the Three Fund Index and the Lazy portfolio. Friday was also a good day for the ETFs. I still have not figured out the ETF portfolio which has done well year to date, but seriously lagged since May.


Click on the image for a bigger view:

Retire in your 40s, no problem!

A friend directed me to an article about retiring in your 40s and talked about how extreme the stories were. I read the article and found the strategies far from extreme!

• Cook cheap meals at home.
• Drive an economy car.
• Find affordable housing, even in expensive cities.
• Don't run the AC all the time.
• Don't spend more as your income rises.
• Live on as little as 25%-50% of your income.

A great quote from the article is:

"I would walk into (a work social event) in my $60 thrift-store gown and my $10 Payless shoes and I would feel like an actual millionaire, because I was..."

So are these strategies extreme?

Cook cheap meals at home. I've already written about tips for saving big time on food costs.

Drive an economy car. I drive a Civic Hybrid. We did buy it new, which was not frugal, but used hybrids were going for close to new prices if you could actually find one. We wanted one so we bit the bullet. We would have spent more money taking the commuter rail than we paid for the car and gas for the 80,000 miles we have put on it and maintenance since 2003, so not only do I enjoy it, it has been a very good deal for us.

Find affordable housing, even in expensive cities. When I got married, my wife and I moved from an expensive apartment near Cambridge to a home outside the city. The mortgage/insurance/real estate tax total was more than our rent, but not by much. After the tax write-off for our mortgage, which was more than the rent write-off that Massachusetts actually does allow, our housing costs were about the same. Rather than buy a more expensive home which our combined incomes would have allowed, we kept our housing costs low and doubled up on payments. After a couple of years we were able to refinance for a 30 year fixed loan at no points at 5.375%. Even with the subsequent spike in real estate taxes that naturally followed the reduction in federal taxes and thus a reduction in state and local tax revenue, our housing costs remain in line with what our rent would have been and we have built equity.

Don't run the AC all the time. We don't own an air conditioning unit. There are a few nights a year that this is not comfortable, but we survive.

Don't spend more as your income rises. Of course nobody wants to just scrape by and if your first salary is not great, you are going to increase your spending as you earn more. But it is up to you and your circumstance how much you increase your spending and if you are frugally minded, you will find that over time you can do more with less. So you can actually do more without increasing your overall expenses. If you lived just fine on your salary 10 years ago and work smart and get promotions, your income should be higher than what you needed to live on back then. Only you can assess if you can you get by on 25-50% of what you earn, but be honest!

I'm going with not extreme on these strategies. Sure I would not make some of the other choices discussed in the article, but I do other things not mentioned. Not buying cable saves me hundreds of dollars a year. Some call that extreme! I'll reevaluate it in my 40s...