10:58 AM
Sparky: are you truly making boxes?
J.D.: No, we’re bitching about stuff.
11:00 AM
Sparky: gotta get back to rewiring
11:10 AM
Sparky: i made my own mutual fund last night and backed tested it from January 6, 2006
Sparky: it came back with a 30% increase to-date.
J.D.: Nice.
Sparky: no, that’s the JD mutual fund
Sparky: 12.3% Consumer Discreationary
Sparky: 8.5% Consumer Staples
Sparky: 11:15 AM
Sparky: 23% Financials
Sparky: 11.5% Health Care
Sparky: 11% Industrials
Sparky: 15% Information Tech.
Sparky: 3.3% Materials
Sparky: 3.5% Utilities
J.D.: This is very, very detailed. Could you not find an existing mutual fund that satisfied your needs?
Sparky: One company from each of those categories
Sparky: those companies were the best of the best for each category
Sparky: Mutual funds in general are too slow.
J.D.: Too slow for what?
Sparky: they can’t buy and sell quick enough to get rid of laggers and add better companies
Sparky: they also don’t tend to return 30%
Sparky: those that do are usually specialty funds
Sparky: and those are not diversified like this one
J.D.: How would your fund have performed over the past ten years?
11:20 AM
Sparky: I didn’t check.
Sparky: but that idea is considered a mistake by Charles Schwab.
J.D.: Which idea?
Sparky: judging a fund by its 5- or 10- or 3 year record
J.D.: He’d rather judge it by its one-year record?
Sparky: no
Sparky: is it diversified
Sparky: does it match your risk tolerance
Sparky: tenure of the manager
Sparky: high MorningStar ranking
J.D.: Ah, right. That I can understand. It’s just that you mentioned the one-year return, which is nice, but seems irrelevant.
J.D.: Why not look at index funds?
Sparky: index funds suck
Sparky: they are intended to match the broad market
Sparky: I don’t want to have my investment to rely on the average of the bad and the good
Sparky: I want the good and the good
J.D.: Index funds outperform managed funds 80% of the time. And over the long term, their record is even better. Index funds have low management fees, which makes their performance even better.
Sparky: I agree.
J.D.: You should see the entry I’m writing for Thursday.
J.D.: Or Friday (can’t remember the day)
Sparky: i pick mutual funds that beat index funds
Sparky: but I want better than just beat
J.D.: It’s based on this.
J.D.: Nobody can do better than just beat over the long term. Unless you’re Warren Buffett.
J.D.: Here’s my current philosophy:
Sparky: a lean individual mutual fund should
J.D.: should, but rarely does…
J.D.: for stocks, invest in index funds (maybe keep money to invest in some stocks)
J.D.: also tuck some into bonds (about which I know very little yet — this is for diversification)
Sparky: Bonds are for retirees
Sparky: more risk!
Sparky: please
J.D.: Well then do real estate.
Sparky: more risk = higher return
J.D.: more risk = more risk
Sparky: thus diversification
Sparky: temper risk with diversification
Sparky: not with built in stagnation like a bond
Sparky: real estate could be a component, but it was not listed as by Chuckie Schwab
J.D.: From my perspective, you’re trying to get things out of the stock market that you can’t realistically expect to get unless you’re working full-time at it and have the natural gifts of Warren Buffett.
J.D.: There are certainly ways to diversify and add risk to your portfolio.
J.D.: Your personal mutual fund is one, and I actually hope that it succeeds. (I’ve been quite pleased that my stock picks over the past year have had such excellent returns…)
J.D.: Phone
Sparky: i think what I am doing is Buffetish
J.D.: If you’re looking to increase risk, then consider real estate. I personally think most real estate — especially in Oregon — continues to be overvalued, but many smart people disagree with me.
J.D.: You might look at precious metals, too. I believe they’re even *more* overvalued than real estate right now, but again: many smart people think they’re a good buy.
Sparky: like really buying a piece of property
J.D.: If you really want to diversify, look at other investment types.
J.D.: Yes, like really buying a piece of property.
J.D.: I’ll admit that I’ve been watching my neighborhood for deals. There was a home for sale up the street that I would have loved to purchase, but it was way overpriced at $150k (it was a piece of junk). And I want to get all my debt eliminated before I start messing with non-stock investments.
Sparky: haven’t you watch Flip This House on Discovery or TLC
J.D.: No.
J.D.: I don’t watch TV!
J.D.: (I watch some shows, but I download them from iTunes.)
Sparky: Maybe on You Tube
J.D.: Good point. There’s something else I’m supposed to look for on YouTube. I’ll have to add this to my list.
Sparky: not really
Sparky: flipping a house looks easy on tv
Sparky: are you familiar with the concept
J.D.: Sure. Here’s how not to do it.
11:45 AM
Sparky: the tv show makes it look so easy and you don’t have to be handy
J.D.: I have mixed feelings about flipping. I’m sure it’s possible to make money at it, but I suspect that like Case in the site I linked above, many (most?) people fail to profit.
Sparky: just subscribed to having a text message sent to me when a web site is updated
J.D.: What’s more, it is not a value-added service. By which I mean, flipping inflates housing prices without adding commensurate value to the economy. I think this is immoral. (This is a half-formed opinion, so don’t hold me to it. )
Sparky: making money is almost immoral in its practice
Sparky: just ask marx
J.D.: Ha! Now you’re getting into nitty-gritty philosophy. What would Adam Smith say? What about Ayn Rand? Rand would say that *not* making money is immoral.
J.D.: (I don’t necessarily agree with Rand, but her ideas sure are fascinating — you should read her.)
Sparky: i am with ayn
Sparky: we live in a market economy, might as well partake
J.D.: I think it’s a vast, complex social system, and there’s no one right or wrong answer. I don’t believe making money is evil, but I certainly don
J.D.: oops
J.D.: don’t condemn social programs designed to help the poor. (Nor do you, I suspect.)
11:55 AM
Sparky: I should go play family
Sparky: i will check back later
J.D.: k

GRS is committed to helping our readers save and achieve their financial goals. Savings interest rates may be low, but that is all the more reason to shop for the best rate. Find the highest savings interest rates and CD rates from Synchrony Bank, Ally Bank, GE Capital Bank, and more.