10-03-2003 05:42									#1
	If you had $500,000 to put in stocks, what would you put it in-also stock stories! Enter the AD-FREE zone

Entering in a stock market game on another message board I post on.....want your advice on what I should buy and why


My stock story which made me 279 dollars

Remember earlier in the year when martha stewart was getting hammered?

I waited for the stock to go as low as I thought it would get as I figured it would bounce back.........I was right by the time I sold after broker fees I had a 279 dollar profit-yey heh!

	10-03-2003 05:48									#2
	Browse Apolyton AD-FREE

I'd open a Cat House in waters off the coast from South Padre.

	10-03-2003 06:22									#3
	Inflate your Upload Space

I'd invest in silver!

	10-03-2003 08:35									#4
	Help yourself to an AD-FREE life

I tend to short stocks if I can.

	10-03-2003 09:09									#5
	Enter the AD-FREE zone

Buy natural gas companies. This was the recommendation of an expert on the Wall Street Journal show today.

Natural gas is at an all time low in supply and is expected to stay that way for at least 5 years.

	10-03-2003 09:54									#6
	Browse Apolyton AD-FREE

Since this is a game, see if you can short on the index futures of Fortune 500.

	11-03-2003 09:15									#7
	Support Apolyton, buy GURPS/ Alpha Centauri

Betcha didn't expect an actual answer to this question. But I got one!

I actually sent the following asset allocations out last week to affix my investment options due to a minimum $500k inheritence I'm to receive. Tis rather a nice thing, being able to bottom feed the market. The portfolio is to be re-invested in full until my minimum retirement age of 60 (25 years from now).

I split up my allocations 60/40 equities/bonds, but I am actually more exposed to corporate America due to that 60% of my bonds are in corporate bonds.

There are a few obvious trends here: I'm heavily invested in Vanguard funds, and I'm heavily invested in index funds, leaving only 1 managed fund in my portfolio - but note, it has the largest chunk of cash going to it. The Vanguard thing is simple - over 95% of funds underachieve the market... except for index funds, which just match it. Obviously, for those of us who do not want to get an MBA in corporate finance, the thing to do is buy a variety of index funds and be happy with merely achieving market returns. Vanguard funds because a., they're the king of index funds, and b., they are cheap, cheap, cheap! The VFINX fund, for example, has an expense ratio of .18%, whereas most fund "advice" columns say you should lower it to a "mere" 1%... for a fund that is 95% guaranteed to do worse than the market index for that funds category. Tsk, tsk - these people ought to be ashamed of themselves.

:climbs off soapbox, gets back on topic:

I am going to rebalance this portfolio once a year, selling those assets that have appreciated and buying more of those that have depreciated. For example, I have a 20/80 split between asset A and asset B. In the space of one year, asset A has increased to 25% of my portfolio, while B is down to 75%. I would then sell my excess A and buy up B to re-achieve that 20/80 split.

This is a slightly risk-averse portfolio that is designed to match the market, not beat it. I am rather exposed if the market has another long neutral period, where it doesn't appreciate considerably for another 10-15 years, but that's why I put 40% in bonds and my largest stock holding is a managed fund by one of the more stable groups in America.

So, here it is: How I invested $500,000 in todays market.

Equity Allocation: 60%

Fund Name, symbol, percentage of total portfolio, percentage of allocation (equity or bond) type:
Vanguard 500 Fund Index, VFINX, 18%, 30%
Vanguard Emerging Mkts Stock Index, VEIEX, 6%, 10%
Dodge and Cox Stock, DODGX, 30%, 50%
Vanguard Small Cap Value Index, VISVX, 6%, 10%

Bond Allocation: 40%
Vanguard Short Term Bond Index, VBISX, 8%, 20%
Vanguard Intermediate Term Bond Index, VBIIX, 8%, 20%
Vanguard Short Term Corporate, VFSTX, 24%, 60%

Last edited by JohnT on 11-03-2003 at 09:20

	11-03-2003 09:29									#8
	Lose 30 kilos (of popups)

quote: Originally posted by JohnT Betcha didn't expect an actual answer to this question. But I got one!

What's wrong with shorting index futures? Actually, it's more like betting the market will go down overall.

	11-03-2003 09:45									#9
	Support Apolyton

quote: Originally posted by Urban Ranger What's wrong with shorting index futures? Actually, it's more like betting the market will go down overall.

Because:

1. It is not a viable long-term portfolio strategy.

2. It wasn't a serious answer to the question - I truly doubt that if you had $500,000 to invest you would put it all on S&P or NASDAQ shorts.

	11-03-2003 09:48									#10
	Support Apolyton, buy Call to Power 2

It's not a long term strategy, but he's only doing it for a game, a short term thing.

If I really have half a million, I would probably short an actual stock instead of the index, but that's a different case.

	11-03-2003 10:01									#11
	Increase the size of your Attachments

I don't know if I would short anything... I'm sure there are some stocks that decline, but it's no longer the sure thing that it was back in 2000. Nasdaq is down 75%, the S&P is down, what, 20-25%? Seems to me the smarter thing to do is buy stocks that aren't worth anything today... do you really think Ford is going to languish forever at $7? Freakin K-Mart is down to $.12/share - take a $20, buy a hundred shares, and spend the rest on lunch.

The point is: by shorting you will be doing what everybody else is doing, and that is never a good thing.

Otoh, betting on the long-term growth of the US economy is a likelier winner given that our country's population is going to double in the next century at a rate almost equal to the globes growth rate.

Last edited by JohnT on 11-03-2003 at 10:09

	11-03-2003 10:05									#12
	Support Apolyton, buy Alpha Centauri

Ya but don't just buy it because it's cheap.

K-Mart for instance, make sure they are still afloat.

	11-03-2003 10:10									#13
	Full PM-box? Change here!

You need to do a lot of homework if you want to hold a stock long term though. How did Ford look in the last ten years? Is the current gloom just an exception?

As for NASDAQ, the company that looks any good is probably Intel, followed by AMD.

	11-03-2003 10:10									#14
	Increase the size of your Attachments

Ted - You don't make money when you sell, but when you buy.

	11-03-2003 10:16									#15
	Tired of ads?

quote: Originally posted by Urban Ranger You need to do a lot of homework if you want to hold a stock long term though. How did Ford look in the last ten years? Is the current gloom just an exception? As for NASDAQ, the company that looks any good is probably Intel, followed by AMD.

Precisely, which is why I'm not investing in any stocks, just stock index funds. I mentioned K Mart and Ford from the top of my head... though I do think that Ford is a good buy, K Mart will likely result in you losing that $12. But it's worth a shot - after all, it can't get any lower.

	11-03-2003 11:17									#16
	Support Apolyton, buy Galactic Civilizations: Deluxe Edition

JohnT,

You are talking about the next century, but what about the next 10-20 years. I think there are a lot of bad years ahead for the stock market. People are starting to live off of their wealth. This started in 2000, and will continue for 10-20 years. Additionally, taxes are going to be huge within 5 years.

	11-03-2003 18:18									#17
	Lose 30 kilos (of popups)

"You are talking about the next century, but what about the next 10-20 years. I think there are a lot of bad years ahead for the stock market. "

You are very likely right... and what's so wrong with starting a 25+ year stock investment plan by buying into year 3 of a 10-15 year bear/neutral market? Isn't that, you know, the idea? To buy when stocks are cheap and nobody wants them (like seemingly everybody else on this thread) and sell them when they are dear and everybody wants them (everybody on this thread in 10-15 years?

"People are starting to live off of their wealth. This started in 2000, and will continue for 10-20 years."

I remember hearing this back in 1980: "The WW2 population controls 80% of all the money and they're going to dump it all when they retire." (that, and "we baby boomers can't get into the upper management positions that are held by old WW2 vets. I wish they'd retire." And Ayn Rand believed that people were rational. )

Regardless, what are the implications of Americans "living off their wealth"? If masses of people are truly selling off their assets, they will have to sell more and more shares to achieve the same income stream... meaning that stock prices are going to (and many have) drop to ridiculous lows. Which, of course, is when you buy.

"Additionally, taxes are going to be huge within 5 years."

Sez whom? Anyway, taxes are only applicable to realized gains... my big issue is the tax code in 30 years - will 401(k)'s and other popular shelters still be around? Can the government keep their fingers off trillion$ in capital accounts? Dare they allow all that income to be earned by the lowly but retiring middle class without taxing it?

Keep your fingers crossed.

	11-03-2003 18:41									#18
	Support Apolyton, buy Galactic Civilizations

The best thing you could do with your money would be to get out of the market.

	11-03-2003 19:21									#19
	Put an end to popups!

Hey JohnT - that was pretty good!

(as a CFA, fully paid subscriber to Institutional Investor, and Bloomberg Professional user, I give you a hearty )

I am so smart I own a bunch of Kmart at $0.96.

	11-03-2003 20:01									#20
	Support Apolyton, buy Galactic Civilizations

It's suffered an 80% drop since, Sten. You need to buy some more!!!!!

Actually, now that it's down to 12 cents a share, it might be worth buying. If the company can ever right itself, a thousand shares of Kmart bought at rock-bottom prices can be worth something in 5-10 years. But I wouldn't put anything more than my "playing around" money in this dog.

	11-03-2003 21:07									#21
	Support Apolyton, buy Galactic Civilizations

JohnT is right about stock indexes. They're the safest, best long-term bet. He's wrong though about K-Mart. It's a dead duck who just ain't dead yet. Target is gonna gobble of the last of its market, and K-Mart's stockholders are going to be very unhappy.

If you want to live dangerously , then you can try to re-live your Martha Stewart coup by investing in AOL/Time-Warner. I mean, can it go any lower??

	11-03-2003 21:11									#22
	Enter the AD-FREE zone

Nah, if you really want to live dangerously, buy some Lucent.

	11-03-2003 22:16									#23
	Browse Apolyton AD-FREE

quote: Originally posted by JohnT "People are starting to live off of their wealth. This started in 2000, and will continue for 10-20 years." I remember hearing this back in 1980: "The WW2 population controls 80% of all the money and they're going to dump it all when they retire." (that, and "we baby boomers can't get into the upper management positions that are held by old WW2 vets. I wish they'd retire." And Ayn Rand believed that people were rational. ) Regardless, what are the implications of Americans "living off their wealth"? If masses of people are truly selling off their assets, they will have to sell more and more shares to achieve the same income stream... meaning that stock prices are going to (and many have) drop to ridiculous lows. Which, of course, is when you buy.

The baby boomer generation is much larger. We've already seen that its aging process is more consequential. Anyway, good for you. We need people to start investing more.

	11-03-2003 23:40									#24
	Avatar Enlargement: We've got the solution

I think a large part of that transition has already set in, as millions of baby boomers have already been shifting their fund allocations to "balanced" and bond-heavy allocations... and the events of the past 3 years have done nothing but hasten that process. Remember, the oldest boomers are but 6-7 years away from retirement - they likely have less equity exposure compared to people younger, which means that the impact of their sell-off will not be as great as you feared.

Imho, we are already in the midst of this transition, which means that the time to start a long-term program would be... now.

	12-03-2003 00:58									#25
	Support Apolyton, buy Civilization 2

JohnT,

They may have sold off some stocks, but that wont stop a general down fall of all markets. True, it might be so that the stock market will fall the least because it is the least inflated, but as the other markets fall that will affect the stock market further becuase people will tranfer funds from the stock market into the other markets to take advantage of lower prices.

You may actually see stocks recover a bit in the next few years. After that there is real danger. Then there will be many sellers and few buyers. That's when taxes will be raised to horrible levels and the baby boomers really start to retire and sell their stocks.

	12-03-2003 01:30									#26
	Support Apolyton buy from Amazon

If I had 500,000 and 25 years to invest it, and staying within the stock market, I would first check out, What Works On Wall Street by James P. O'Shaughnessy, and follow his advice when I go to sit down with a financial advisor. O'Shau ussually suggests high PE and low PSRs. I think, in any market, that this is a good long term strat. I would do what he says with about 75-85% of the money. The rest I would invest rather rashly in some stocks with good rep and a good sales, even if their price sucks. I would try and predict market fluctuations through population trends, and would therefor buy into underpriced or emerging pharmeceutical companies with a good amount of capitol.

Personally, I would take about 50% of the money and do that. The other 50% I would sink into real estate and/or annuities.

I am a risky investor and might even consider futures. I would never short a stock or buy a mutual fund.

	12-03-2003 01:34									#27
	Increase the size of your Attachments

You're all wrong!

He should invest his entire allocation in Banana futures! Remember that the Cavendish Banana is dying! Out!

	12-03-2003 09:05									#28
	Increase Your PM Length

quote: Originally posted by Sten Sture Hey JohnT - that was pretty good! (as a CFA, fully paid subscriber to Institutional Investor, and Bloomberg Professional user, I give you a hearty ) I am so smart I own a bunch of Kmart at $0.96.

If Sten Stenish certifies it then it's a good bet.

	12-03-2003 18:53									#29
	Inflate your Upload Space

Yes, Ted, your absolutely right. Where are my manners?

Thank you, Sten. That means a lot. My Uncle thought that I did a pretty good job too:

quote: I received your letter of 2/05/03 today and I think you did a great job of selecting your asset allocation especially for someone that is new to this game. You seemed to have really worked to "get it correct" instead of just putting something down on paper. I congratulate you for doing that... First, I would NOT consider the 18% in Dodge and Cox as medium to high risk as compare to the S&P 500. I think it might be interesting for you to look at their many decades of performance of D&C stock versa the S&P 500 Index fund... I really did think you did a fine job, but just maybe we can make it a little better for you and your family... You did a really great job for the first cut.

Given how much asholes the rest of my family has been over the past 7 months, this was really nice. Especially coming from a guy who retired when he was 41 to live as a private investor of his own money... and has done quite well since 1980.

	12-03-2003 19:02									#30
	Support Apolyton

quote: Originally posted by Japher If I had 500,000 and 25 years to invest it, and staying within the stock market, I would first check out, What Works On Wall Street by James P. O'Shaughnessy, and follow his advice when I go to sit down with a financial advisor. O'Shau ussually suggests high PE and low PSRs. I think, in any market, that this is a good long term strat. I would do what he says with about 75-85% of the money. The rest I would invest rather rashly in some stocks with good rep and a good sales, even if their price sucks. I would try and predict market fluctuations through population trends, and would therefor buy into underpriced or emerging pharmeceutical companies with a good amount of capitol. Personally, I would take about 50% of the money and do that. The other 50% I would sink into real estate and/or annuities. I am a risky investor and might even consider futures. I would never short a stock or buy a mutual fund.

Is that supposed to be "50% of the remaining money"?

Before I would do that, I would read (thoroughly!) William Bernsteins The Four Pillars of Investing. Perhaps I'm a bit more risk averse than you (wife, baby, mortgage will do that to ya), but I truly believe that the markets are chaotic, not rational, and their ups and downs are determined far more by psychology and emotion than mathematical ratios and reason.