Investing My 2007 IRA Contribution

I added my Roth IRA contribution for 2007 at the beginning of the year (you can add an IRA contribution for 2007 any time up until tax day in 2008), but I have not invested it yet. Actually, the Roth IRA I have been tracking in the Portfolio experiment is just mine, but as I mentioned here (see point #3), I manage both my and my wife's IRAs as one:


So I built a portfolio at Morningstar of our combined IRAs and will use it in the weekly portfolio updates going forward:


Last year, I added some international and small and mid cap domestic ETFs to fill in some category gaps.

• VWO Vanguard Emerging Markets Stock ETF -Diversified Emerging Mkts
• EFA iShares MSCI EAFE Index -Foreign Large Blend
• EFV iShares MSCI EAFE Value Index -Foreign Large Value
• VOE Vanguard Mid-Cap Value ETF -Mid-Cap Value
• VB Vanguard Small Cap ETF -Small Blend

As you can see in the image above, VWO was the top performing holding since 5/01/2007 but the other 4 holdings lost money. That's ok though. These are all index funds and they cover broad indexes that I intend to add to over the years. If global markets and small and mid sized American companies have not added value by the time I retire, my IRA will be the least of my concerns.

So the question is, what should I invest in now?

For the most part I feel pretty good about the diversity of different markets, different fund companies, and different styles (managed vs index) that I have picked so far.

I thought about adding a gold fund, MIDSX Midas, last year but opted not to. I was willing to invest in the super hot Emerging Market sector but not also in the super hot gold sector. Well, chasing performance would have paid off, in the short term- MIDSX was up 31% in 2007 and crushed other funds in its category by 8%. I am not sure why Morningstar has it at 2 stars. M* bases its star rating on performance in light of a fund's risk compared to similar investments. This fund has high expenses and is volatile, but over the long term has crushed its competition.


Anyway, I did not invest in a gold fund and with gold over $900 an ounce, I can't bring myself to invest in one now either.

Except that I am interested in adding a commodity fund which may include gold. One option is DBC PowerShares DB Commodity Index Tracking Fund which invests about 10% in gold. DBC is heavily weighted in oil though and I have an Energy fund PRNEX T. Rowe Price New Era that gives me coverage of oil.

I like the sector diversification of DJP iPath Dow Jones-AIG Commodity Index Total Return ETN better. I wish it was not an ETN, since investing in an ETN means I have to pay attention to Barclays as a bank. If Barclays goes under, this investment would be worthless. I already invest in a few individual companies. BXP Boston Properties makes up over 7% of my IRA investments and it lost 22% last year so I have a high tolerance for volatility and am already tracking individual companies so this is not a problem, just not ideal.

The other sector I am considering is the financial sector. As hammered as it has been with the sub-prime mess, I'm tempted to invest with the hope that I am picking up a lot of solid companies at good prices. Doing some analysis makes me think twice. The second largest holding I have in my IRA is DVY iShares Dow Jones Select Dividend Index and 50% of that holding is invested in domestic financial companies. The Financial ETF I am interested in is IXG iShares S&P Global Financials which is over 60% invested in foreign companies. The truth is that the fund EFV iShares MSCI EAFE Value Index that I bought last year is over 40% invested in foreign financial companies so I already have exposure there as well.

Since I already have a large stake in DVY, the simplest way to increase my exposure to financial companies is to increase my position in EFV instead of adding yet another fund.

After thinking about all this a bit and doing some research, what I think I am going to do is add a commodity investment (an ETN is not a 'fund'), and then increase my smaller positions that performed poorly last year.

I have my contribution for 2007 plus cash that has accumulated in the accounts from dividends and capital gains distributions. What complicates things is that I only have a specific amount of cash in each account so the amount I can add to each holding depends on which account the cash is in and since I do not want the same holding in two different accounts, which IRA the ETF is already in as well. It is a little complicated, but not rocket science. Here are the investments I will add to and the percentage of the cash I have available I will add to each:

• DJP iPath Commodity Index Total Return ETN- Broad Commodities 30%
• EFV iShares MSCI EAFE Value Index -Foreign Large Value 20%
• EFA iShares MSCI EAFE Index -Foreign Large Blend 10%
• VOE Vanguard Mid-Cap Value ETF -Mid-Cap Value 25%
• VB Vanguard Small Cap ETF -Small Blend 15%

And if I do this, here is what the big picture will look like:

Yea Etrade Bank, Boo Etrade Brokerage

I recently posted about how Etrade failed to post my $25 sign up bonus in the timeframe they commited to.

After a gentle reminder to their customer service department, the $25 was promptly posted.


Still no ATM card, but I sent that request via snail mail so I don't expect to hear back for a while.

Then when Etrade does the right thing, another issue crops up.

A couple of days ago I tried to add a small amount to a mutual fund I own: PNRZX Jennison Natural Resources Z.

Etrade's interface listed the details- this is a no load fund with $0 minimum for additional investments meaning I can add $5 if I want- some funds require at least $100 or $1000, etc.

Then when I tried to buy, I got an error message. I had added a little to this fund in early January so I was surprised by the issue. I sent another note to Etrade's customer service inquiring about the error. They must be getting tired of me, but I don't make these issues up.

They responded:

"Thank you for your message regarding trading PNRZX. I apologize for any confusion. We no longer have a selling agreement with Jennison to sell the PNRZX fund. I have submitted a request to see if we can get another selling agreement but there is no guarantee that we are able to get an agreement. If you wish to sell the fund you can contact us by phone and we can place the trade for you. We can not allow you to purchase more shares through us until we have a selling agreement with the fund company."

Ok- so that is a bummer, but what irks me is they did not let me know. I own the fund, I add to it regularly. I have to find out by getting an error message and miss an investment opportunity? How hard is it to query out investors who own a fund when they lose the ability to buy or sell that fund through their interface and send us a heads up? How many other Etrade investors own this and are going to try and sell their holding and be thwarted?

Morningstar still lists that the fund is available through Etrade? See how Etrade is advertising itself on Morningstar's site above this false information?



I sent Morningstar an update that the fund is no longer available through Etrade. I'll let you know what they say.

You'll also note in the image above that the fund has an initial investment minimum of 10 million dollars. I put a little less than that (understatement) into the fund back in May 2006 (my initial investment is up almost 23%, the addition I made in Jan is down 5%).

I wonder if Jennision is trying to cut down on new cash coming into the fund, but does not want to close it to new investors for some reason. I also wonder if other fund companies are terminating buy agreements with Etrade and if this is a symptom of bigger issues? I really have no idea in either case, I just know if I want to sell the fund, I have to call Etrade and then try and avoid the fee they charge for phone orders...


Anyway, I understand that fund companies are going to do what they want, but I would have appreciated a notice about the change before I actually tried to add to my holding.

Portfolio Update 2/8/08: The Portfolio Shuffle

With all the recent swings in markets around the world across all sectors, the portfolios I track have not performed evenly.

Last week I noted that Real Estate was up for the year. Well that did not last. The managed and index real estate funds I track where all down over 7% last week. And BXP Boston Properties was down over 9% for the week. Click on the portfolios below to see for yourself.

Since I added a fund to the WylieMoney Slowly account, it's total loss since May 1st was reduced and it now sits in second place.

You'll also note that my Roth IRA had a tough week and is really struggling year to date.

Almost 20% of my Roth IRA is invested in SPY which is in last place as a portfolio in the experiment so that explains some of the lag. BXP being the third largest holding is another reason for the recent drop. The forth largest holding is DVY which is down over 13% since last May. Much of that is due to banks trying to profit off people with poor credit reaching for a version of the American dream they can't afford. DVY invests in Dividend paying blue chip companies.

Blue Chip. I wonder what that means exactly...

Long term I feel fine about these funds for an IRA. I made my 2006 contribution but have yet to invest it and I am tempted to add financial services as a category because they have been beaten down and the core business there- to help people and businesses manage money and leverage debt to do things- is solid and will be profitable both for honest and fortunate institutions and honest and fortunate people with solid ideas and dreams who leverage them.

Anyway here are the details on my Roth IRA:


What continues to surprise me is that the portfolio of 20 funds I picked remains in first place and had the best week of all the portfolios.

What is actually more surprising is that the Three Fund Index portfolio, which does not have 1/20% stake in Real Estate has fallen off a cliff anyway and now lags the Lazy 20 Mostly Index portfolio. For a long time it was nipping at the heels of the Mostly Managed portfolios I picked, but this year it is the worst performing diversified portfolio.

WylieMoney 20 Mostly Managed

WylieMoney Slowly

Lazy 20 Mostly Index

Three Fund Index

ETF 20

S&P 500

Etrade Bank Account Has Been Nothing But Trouble So Far

As I mentioned at the end of last year, I am switching banks. I chose Etrade and opened the account. So far the experience has been very poor.

I chose the account for a number of reasons.

1) The rate was 5% when I signed up.

That did not last a month. It is now 4.40%. This is the most excusable thing that has happened. Since the 'Fed' lowered rates significantly in January and Etrade is not the only bank that has lowered rates in response. They post clearly that rates can change.

2) I thought my checking account would include an ATM card.

Etrade will not send me an ATM card until I fax in or mail a request. This is a Bank account. They advertise no ATM fees as a big feature. But you don't get an ATM card unless you fax a request for one? I guess one way to avoid ATM fees is to not get an ATM card... This is silly because, it was not clarified in the sign up process, and I got an ATM for my Etrade Brokerage without this much hassle. I also got my ATM card for my previous online bank account without this much hassle.

3) There was a $25 sign up bonus.

I signed up with an offer of $25 if I opened the account before Dec, which I did, as a new Etrade Bank account which it was, with money from outside Etrade which I used.


The details above (click for a larger view) specify that $25 will be credited to my account within 30 days of it being funded. Well my initial deposit posted 12/28/07. It has been more than 30 Days. The funds have not posted.

My experience with Etrade's bank account so far has been terrible. I'll keep you posted about if I get my ATM card and if they finally post my sign up bonus.

Deposit Your Checks at Home with a Scanner!

When I was researching a new bank account, one of the features I heard about from a friend whose bank offers it, is the ability to scan a check for deposit on a home computer.

I have been banking online since 1999 and when I first signed up with Citibank, they sent me free- prepaid envelopes for deposits. It took time for the check to go through the mail, but this worked fine for me. Of course it did not take long for Citibank to drop that feature, and of course they did not notify me as a customer that this change was coming or when it happened. Since there are no branches anywhere near where I live or work, I now have to pay to make deposits. This is one of a long list of offenses that led me to begin the process of changing banks.

So it has been a drag that to bank online means I have to pay for a stamp to mail in a check.

When my friend told me he scanned checks and that the scanner worked just fine on his Mac, I was pumped. Problem is, his bank is only available to military personnel or their families.

Well it looks like this feature may be coming to more banks soon! Read here for more info.

A Good Day to Buy

Today is the day I am adding AAGPX American Beacon Large Cap Value Fund to the WylieMoney Slowly Portfolio.

Read more about my mutual fund experiment here.

Now that's a red box:

Portfolio Update 2/01/08: WylieMoney Back in Black!

If you scroll down to the screenshots of each portfolio, you will see that one month into 2008 the only funds making money are Bond funds and...

Real Estate!

Since I added a Real Estate fund to the WylieMoney Slowly portfolio in January, that portfolio has put significant distance between itself and the Three Fund Index portfolio that ranks after it in percentage gain/loss since May 1st. Just to clarify, this pick was not about market timing- Real Estate was the 9th category I intended to add to the WylieMoney Portfolio back in May and January was the month for pick #9.


The result of this is that the two portfolios of low cost funds I researched and selected, all available through a single brokerage, are solidly outperforming the Vanguard portfolios and indexes they seek to beat. You'll also note that my actual Brokerage and Roth IRA are now in the top four performers since last May. I attribute this to Real Estate as well. Aside from a real estate fund- REACX American Century Real Estate which makes up a little under 4% of my Brokerage account, I have over 4% invested in BXP, Boston Properties. BXP was up over 4% last week alone.

I'm sure I'll pay hefty taxes for owning so much Real Estate in a non-retirement account, but as long as I'm paying taxes on profits, I don't mind.


All the portfolios had a good week, but only one is back in black.

All hypothetical portfolios managed using Morningstar's free online portfolio tool.

WylieMoney 20 Mostly Managed

WylieMoney Slowly

Three Fund Index

Lazy 20 Mostly Index

ETF 20

S&P 500 (SPY)