Some people elect not to pay for investment advice and choose to go it alone. If you have that mindset it’s OK. We just don’t want to see you picked apart. Fact: Wall Street is not on your side.
Many Brokers want to see you play because it gives them a shot at gaining control of your savings. This is no secret. So here are some investment “Do’s and Don’ts” and three model portfolios to consider that won’t get you in trouble.
Do
- Do choose a low-transaction-cost Broker who won’t trade against your orders.
- Do use Exchange Traded Funds (ETF’S) and Closed End funds trading at a discount.
- Do diversify your holdings. Thirty to fifty individual securities does not provide sufficient diversification. You need 2,000.
- Do consider valuations when buying. In the long run, stock prices are determined by earnings, growth rate and interest rates. The purchase price you pay is crucial.
- Do rebalance your positions when one security rises and another falls.
Don’t
- Don’t ever buy an investment product from a salesman. This includes every product that pays a commission to someone to sell it to you.
- Don’t ever buy a variable or index annuity for any reason.
- Don’t ever buy a life insurance product as an investment. Life insurance should be purchased solely for its death benefit.
- Keep away from non-registered securities like private placements, limited partnerships, etc. If it doesn’t have a symbol it can be loads of trouble.
- Don’t let anyone convince you that a stock analyst using six-month-old financial statements can somehow use that data to correctly predict the future price of a stock. It’s a myth and a very effective one at getting people’s money.
Here are three Model Portfolios with proper diversification for your consideration. Portfolio I is the best of the three models, but you have to have access to DFA funds. DFA funds are not available through commissioned Broker/Dealers, and Investment Advisors must qualify with DFA to offer their funds.
| Model Portfolio I | |
| DFSTX US Small Cap | 7.5% |
| DFEOX US Core Equity | 7.5% |
| DFSVX US Small Value | 7.5% |
| DFLVX US Large Value | 7.5% |
| DFIEX Int’l Core Value | 15% |
| DISVX Int’l Small Valu | 15% |
| DFFGX 5-Year Gov’t | 40% |
| Model Portfolio II | |
| SPY | 15% |
| MDY | 15% |
| QQQQ | 15% |
| IWB | 15% |
| SHV | 40% |
| Model Portfolio III | |
| SPY | 10% |
| VBR | 10% |
| DLS | 10% |
| VTV | 10% |
| IWM | 10% |
| MDY | 10% |
| VIPSX | 20% |
| SHY | 20% |
We’re glad to share these investment tips with you. Please check our website from time to time and see additional information, or contact us at Ashford Investment Advisors.