A Presidential candidate, John McCain, has offered a $300 million prize to the person who comes up with a revolutionary energy-saving battery.
Now, I could use $300 million as much as the next guy, but I’m busy enough as it is trying to come up with solutions to a bunch of gnarly investment challenges. In fact, I hereby offer a reward to whoever dreams up practical solutions to any the puzzles described below. Just don’t expect $300 million.
+ I want good advice about dollar-cost-averaging. Should I do it every week, every month, every three months, every year? Should I dollar-cost-average into value funds and stocks faster than into other securities? (Because they're presumably already bargains.) Should I dca into a market-timing fund (e.g., Vanguard Asset Allocation) or blow my whole wad all at once? (That seems sensible if I have confidence in a market-timing fund.) Is it really worth the effort to dca more aggressively when your target security has gone down a whole lot, and dca less when the target security isn't down a whole lot?
I once heard someone ask John Markese of the AARP (one very smart cookie), “How frequently should I dca?” His answer: “Every year. "EVERY YEAR?” said the questioner, in utter shock. "OK, every three months," said Markese obligingly.Â
+ I need good advice about re-balancing. How often should I do it? Every six months? Every year? Or only when my asset allocation is way out of whack? And what does “way out of whack” mean? (I’ve heard as little as 10% away from my standard.) Should I bother rebalancing at all—why not just let my winners ride? And should I rebalance not just my percentages in stocks, bonds, and cash, but also in large-caps and small-caps and value and growth and foreign and domestic stocks?
+ On the subject of value and growth, I know I should tilt my portfolio towards value because value has done better over the years. But are there any good guidelines? How about 60% value, 40% growth?
Jean-Marie Eveillard, that value investor and Gallic genius, was once asked how much of an investment portfolio should be in growth stocks. His memorable answer: “Zeelch.”
+ I need good advice about market-timing. When the market seems frothy and fearsome, should I go entirely into cash? Or just raise a bit of cash? Or should I just move into more conservative, dividend-paying blue-chips? Or do nothing at all, recognizing that even if I get out at the right time I may not get back in at the right time?
I need good advice about selling losers. I recently told an inquirer that she should hold onto her good stocks, despite their having lost money, because the market always comes back. I also told her to sell her losers and put the balance into stocks that seem more likely to rise. “Well, which is it, shnook?” she demanded. “Hold onto my good stocks or sell them because they’re losers?” (I think “schnook” must be Swahili for “good friend.”) I suppose the best answer is: If you have a significant loss in a taxable account—and to me, “significant” means $500 or more*--and you know of a stock that seems just as good if not better than your loser, and you know it just as well as you know the loser you own, and it’s also darned cheap, you should probably sell for the tax loss and buy the new stock.
I also need an answer to the question: How come other value investors don’t do as well as that fellow out in Omaha? Other value investors have read Graham, they’ve read the Berkshire annual reports, they try to buy when there’s blood in the streets and sell when there’s dancing in the streets. How come these other value investors are just also-rans—they are nowhere near as successful or as famous as that other fellow named Warren?
You will agree, I presume, that these are questions that we could use answers to. So, wouldn’t it be kind of nice if we could persuade the Ford Foundation or some other moneybags to advance the cause of investment knowledge by offering million-dollar prizes to whoever can come up with persuasive answers?
*Hey, I’m just an ink-stained wretch—not a big investor.
Now, I could use $300 million as much as the next guy, but I’m busy enough as it is trying to come up with solutions to a bunch of gnarly investment challenges. In fact, I hereby offer a reward to whoever dreams up practical solutions to any the puzzles described below. Just don’t expect $300 million.
+ I want good advice about dollar-cost-averaging. Should I do it every week, every month, every three months, every year? Should I dollar-cost-average into value funds and stocks faster than into other securities? (Because they're presumably already bargains.) Should I dca into a market-timing fund (e.g., Vanguard Asset Allocation) or blow my whole wad all at once? (That seems sensible if I have confidence in a market-timing fund.) Is it really worth the effort to dca more aggressively when your target security has gone down a whole lot, and dca less when the target security isn't down a whole lot?
I once heard someone ask John Markese of the AARP (one very smart cookie), “How frequently should I dca?” His answer: “Every year. "EVERY YEAR?” said the questioner, in utter shock. "OK, every three months," said Markese obligingly.Â
+ I need good advice about re-balancing. How often should I do it? Every six months? Every year? Or only when my asset allocation is way out of whack? And what does “way out of whack” mean? (I’ve heard as little as 10% away from my standard.) Should I bother rebalancing at all—why not just let my winners ride? And should I rebalance not just my percentages in stocks, bonds, and cash, but also in large-caps and small-caps and value and growth and foreign and domestic stocks?
+ On the subject of value and growth, I know I should tilt my portfolio towards value because value has done better over the years. But are there any good guidelines? How about 60% value, 40% growth?
Jean-Marie Eveillard, that value investor and Gallic genius, was once asked how much of an investment portfolio should be in growth stocks. His memorable answer: “Zeelch.”
+ I need good advice about market-timing. When the market seems frothy and fearsome, should I go entirely into cash? Or just raise a bit of cash? Or should I just move into more conservative, dividend-paying blue-chips? Or do nothing at all, recognizing that even if I get out at the right time I may not get back in at the right time?
I need good advice about selling losers. I recently told an inquirer that she should hold onto her good stocks, despite their having lost money, because the market always comes back. I also told her to sell her losers and put the balance into stocks that seem more likely to rise. “Well, which is it, shnook?” she demanded. “Hold onto my good stocks or sell them because they’re losers?” (I think “schnook” must be Swahili for “good friend.”) I suppose the best answer is: If you have a significant loss in a taxable account—and to me, “significant” means $500 or more*--and you know of a stock that seems just as good if not better than your loser, and you know it just as well as you know the loser you own, and it’s also darned cheap, you should probably sell for the tax loss and buy the new stock.
I also need an answer to the question: How come other value investors don’t do as well as that fellow out in Omaha? Other value investors have read Graham, they’ve read the Berkshire annual reports, they try to buy when there’s blood in the streets and sell when there’s dancing in the streets. How come these other value investors are just also-rans—they are nowhere near as successful or as famous as that other fellow named Warren?
You will agree, I presume, that these are questions that we could use answers to. So, wouldn’t it be kind of nice if we could persuade the Ford Foundation or some other moneybags to advance the cause of investment knowledge by offering million-dollar prizes to whoever can come up with persuasive answers?
*Hey, I’m just an ink-stained wretch—not a big investor.
