From: owner-persfin-digest@lists.xmission.com (persfin-digest) To: persfin-digest@lists.xmission.com Subject: persfin-digest V5 #55 Reply-To: persfin Sender: owner-persfin-digest@lists.xmission.com Errors-To: owner-persfin-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes persfin-digest Thursday, October 8 1998 Volume 05 : Number 055 In this issue of the Personal Finance Digest: Diversified portfolio RE Asset Allocation v5 #54 Re: Asset Allocation Re: Roth IRA conversion Re: Asset Allocation re: asset allocation balance transfer Re: Credit card rebates The messages posted to the Persfin-Digest are opinions and are not intended to substitute for qualified professional advice. Subscribers should seek the services of qualified professionals for such advice. The publisher, Internet provider, and Digest contributors cannot be held responsible for any loss incurred as a result of the application of any of the information provided here. 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Subscribe: e-mail majordomo@xmission.com, text: subscribe persfin-digest Unsubscribe: e-mail majordomo@xmission.net, text: unsubscribe persfin-digest ---------------------------------------------------------------------- Date: Tue, 06 Oct 1998 11:09:24 -0400 From: PowellFamily Subject: Diversified portfolio I really liked the article in the October Money magazine. I believe it was the Texan, Rainwater, who pointed out that you only needed a diversified portfolio to protect the wealth you already have. If you are in the wealth building stage, however, there are better ways of doing it. Sherri - - ------------------------------ Date: Tue, 6 Oct 1998 11:40:03 -0500 From: "Richard A. Bauer" Subject: RE Asset Allocation v5 #54 Peter & Karen wrote: Subject: Asset Allocation I am in the process of picking an investment for a new IRA and have been thinking about asset allocations. The premise of a balanced portfolio of various asset classes and investments makes sense in principle. On the other hand I can't exactly see the problem with picking the best performing asset class and sticking with that one. For example, many people would add an international, small cap or bond investment class to a portfolio. This would balance out the returns since those investments would be doing well when your large cap investments are doing poorly. But if those investments will produce an overall lower return based on their historical averages, what is the point? I really don't care how the portfolio performs year to year. When you are talking about retirement savings and IRAs specifically, what I really want is the most money in the account in the end. Since you shouldn't be taping into it, who cares how you got there? I have at least 30 years for the money to grow and putting some of it into an underperforming asset can really hurt in the long run. >>Who am I. Just another private investor with my own biases. I couldn't agree more! That doesn't mean I do what you suggest. I do allocate to money markets, intermediate term bond, and various large indexes such as S&P 500, Total Stock Market, Income/Growth. I still like the warm and fuzzy of minimizing large swings in my portfolio value. My portfolio went down less than 10 % second quarter to third quarter. Also, I have no more than 12% in any one fund. I do not invest in sector funds (gold, oil, utilities, technology, health, financial, etc.). Reason: I haven't a clue as to when these are good and when these are bad markets. If I did, I would be timing the market, and I have tried that - and at least I can't do it. My problem with your picks is that you want to pick the best performing asset class. Best performing over what time period. If over 20+ years, then you might pick something that hasn't performed well over the last five year (buggy whips?). If over 5 years, you might be hitting a whim that won't last. Have fun..... Richard, retired, but still working - - ------------------------------ Date: Tue, 6 Oct 1998 15:37:50 -0400 From: Rich Carreiro Subject: Re: Asset Allocation >The premise of a balanced portfolio of various asset classes and investments >makes sense in principle. On the other hand I can't exactly see the problem >with picking the best performing asset class and sticking with that one. That is EXACTLY the problem! While it is trivial to determine what the best-performing asset class was looking backwards, you (and everyone else) have no idea what it will be looking forward. Rich Carreiro rlcarr@animato.pn.com P5-100/RedHat Linux 4.1 - - ------------------------------ Date: Tue, 6 Oct 1998 15:33:33 -0400 From: Rich Carreiro Subject: Re: Roth IRA conversion >I understand that the taxes on a Roth IRA conversion are calculated based on >the value of all IRAs at the time of conversion. Uh, not quite. (1) Tax-wise, an IRA->Roth conversion is simply a distribution from an IRA, but with the 10% early withdrawal penalty waived (and for 1998 only, the option to spread the taxable income from the distribution out over four years). (2) Because of (1), the taxable part of any conversion is computed just like any other IRA distribution. (a) If you have never made a non-deductible contribution to a traditional IRA, the total amount of the conversion will be taxable. The value of your IRAs is irrelevent. (b) If you have made a non-deductible contribution to a traditional IRA, you'll use Form 8606 to determine the taxable amount of the conversion. That amount will be based on the amount of the conversion, the total value of your traditional IRA accounts, and the amount of non-deductible contributions you've made over the year. (3) Existing Roth IRAs are also irrelevent for this calculation. Rich Carreiro rlcarr@animato.pn.com P5-100/RedHat Linux 4.1 - - ------------------------------ Date: Wed, 7 Oct 1998 00:01:39 -0400 (EDT) From: "L. Chen" Subject: Re: Asset Allocation > I am in the process of picking an investment for a new IRA and have been > thinking about asset allocations. > The premise of a balanced portfolio of various asset classes and investments > makes sense in principle. On the other hand I can't exactly see the problem > with picking the best performing asset class and sticking with that one. > For example, many people would add an international, small cap or bond > investment class to a portfolio. This would balance out the returns since > those investments would be doing well when your large cap investments are > doing poorly. But if those investments will produce an overall lower return > based on their historical averages, what is the point? I really don't care > how the portfolio performs year to year. When you are talking about > retirement savings and IRAs specifically, what I really want is the most > money in the account in the end. Since you shouldn't be taping into it, who > cares how you got there? I have at least 30 years for the money to grow and > putting some of it into an underperforming asset can really hurt in the long > run. > Just a thought. I was wondering if anyone else has thought about the asset > allocation issue this way. You don't do asset allocation within the IRA; but on your overall investment portfolio -- both IRA and conventional investments. Chen - - ------------------------------ Date: Wed, 07 Oct 1998 08:21:04 -0400 From: Randy Barnes Subject: re: asset allocation Peter, I for one think you're on the exact right path. forget diversifying away your nest egg. All this will do is stabilize your account, and cost you several percentage points, IMHO. Live with the volatility and reap bigger rewards down the road. Since this is an IRA you're talking about I assume you can buy common stocks and that's what I'd do. Keep your account simple and stay invested. This is a great time to be getting in, but over the long haul that doesn't matter. Add all you can as often as you can and 30 years will make you a millionaire with one hand tied behind your back. (Actually a million may not be enough for your basic needs by then) I love SPY, the S&P 500 index shares traded like a stock on the Amex. Also you should consider the "fab-4" (my term) which is a variation of the Foolish Four, with much better and more consistent results. If you like, check out our investment club site http://www.mindspring.com/~rbarnes/aaic.htm - hit the links to "RP"version, and check out our portfolio. The "fab-4" are in italics. Here's a little example of what you'll find. RP 4 Fool Four Past 5 Years: 25.53% 21.29% Past 10 Years: 23.36% 20.92% Past 15 Years: 25.04% 21.66% Past 20 Years: 24.32% 20.87% Past 27 Years: 24.16% 21.97% Past 37 Years: 19.64% 18.20% It's your money. use your head, but do it so you can sleep soundly at night. Compare any recommendation to the S&P return, and to the numbers above. I think you'll make the right decision. - -Randy > I am in the process of picking an investment for a new IRA and have been > thinking about asset allocations. > The premise of a balanced portfolio of various asset classes and investments > makes sense in principle. On the other hand I can't exactly see the problem > with picking the best performing asset class and sticking with that one. > I have at least 30 years for the money to grow and... > Thanks > Peter - - ------------------------------ Date: Wed, 7 Oct 1998 16:26:31 -0700 From: "sreeni tellakula" Subject: balance transfer Hi I keep getting offers from credit cards at 3.9% to 4.9%APR. I have an auto loan at 7.75%. If I transfter this loan to the credit card, will I save? Can some one tell me how credit cards compute interest? For ex: the auto loan - the interest is calculated as follows: balance: 10000, 1 month time, APR 7.75% Interest at end of month = 10000 X 7.75 / (100 X 12) = $64.58. Thank You - --- Sreeni Tellakula sreeni@isi.com - - ------------------------------ Date: Thu, 8 Oct 1998 12:22:09 -0400 From: "Steve Foulks" Subject: Re: Credit card rebates A friend of mine was asking about credit card rebates. We both have GM and Ford cards that we max each year. We were thinking that credit cards with frequent flyer miles would be our next best choice. Does anyone out there have any thought on good frequent flyer mile credit card programs? - - ------------------------------ End of persfin-digest V5 #55 **************************** - To unsubscribe to persfin-digest, send an email to "majordomo@xmission.com" with "unsubscribe persfin-digest" in the body of the message. For information on digests or retrieving files and old messages send "help" to the same address. Do not use quotes in your message.