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Announcing the Winner of the $25 “Invest Lazy Man’s Money” Game

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Last week, I decided to try something a little new and offer $25 for people to give me ideas on investing my money. I purposely left the guidelines a little loose. Investing is extremely broad to start with. It's also extremely personal. A successful recommendation would have to know my risk tolerance as well as my existing asset allocation. In addition the best suggestions would have been following along with my blog for the last 5 years to know that I have strong feels against certain investments. These are all things that I couldn't reasonably ask - especially for only $25.

I'll go through the suggestions in order make a comment on them.

  1. Matt (with The Online Budget) suggested that I short a gold ETF. This was a strong first suggestion. He went with my ETF preference. However, he also nailed it in two other areas. One is that he went for something that has appreciated quite a bit, so it could be seen as in a bubble. That would making shorting it a potentially wise move. The other is something he probably didn't know... I don't like gold very much as an asset. It feels antiquated to me and it doesn't have much useful value as commodity. People tend to store it away. Soybeans or oil on the other hand, well people really need those. If 99.99% of the world's gold disappeared, human kind might not be any kind of danger. I don't know if I could say that of other commodities.

    The only thing that I didn't like about this suggestion is shorting a stock. I'm uncomfortable with the long-term risks associated with it.

  2. Tom suggests that I don't try to time the market. I'm going to "bah-humbug" on that one. I have come very close to calling bottoms in 2001 and 2008 and if I had acted on them rather than not trying to time the market, I would have made 50% on that money right away - maybe even close to 100%. Instead my investments have gone down and back to where they were about 12 years ago. I'm not saying you shouldn't try to time the market, but it does make sense to take advantage of buying opportunities.

    As for the rest of his suggestion of 50% in VTI and 50% in VEU, that looks similar to what I suggested in my lazy portfolio in September of 2007. Though I was going to diversify more with real estate and bonds rather than be in all stocks. It's a good suggestion, but considering that I already have my portfolio heavily weighted in those stocks, I'm looking for something a little different.

  3. Financial Uproar suggested iShares Mortgage REIT ETF (ticker symbol REM). I like the 8% yield. Here's what I don't like: It hasn't really been beaten up this year - it's been around this price since late 2008. As Financial Uproar says, "it should do well as the housing sector recovers, whenever that is..." That is a bit of a problem for me as I've read that losses are expected for at least another year (using comments made in a previous release of the Case-Shiller Index). I don't study these things with as much zeal as I used to, but I'm going to pan this suggestion. It may be a great hedge against rising house prices in the future however. That's food for thought.
  4. Contrarian suggested that I look at the stock Forex. He then went on a complex talk that made my head explode. After I gathered the pieces and Humpty'd Dumpty'd my head (the King's men weren't good at puzzles), I nodded my head and thought, "There's something to this." It's a good suggestion. However, I might go him on better on his suggestion. Having gone to Finovate yesterday, I saw a company called Currensee that allows you do currency trading.

    Contrarian was right that currency trading is difficult stuff and not for the faint of heart. So Currensee allows you to cheat by duplicating the trades of other top performing traders. It's high-risk stuff, but I think it could be a new asset class like P2P lending offering a different kind of diversification. Currensee deserves a full article.

  5. Cynthia Rafler suggested that I buy gold. She specifically said, "people are profiting from end of the world fears and if the world changes, it is likely gold will become currency." I'll take the risk of the world not ending. As for gold becoming the currency, I don't see it happening. I believe a bucket of apples or my bag of peanuts will be more important to you than your gold. You'll may disagree, but let's wait until you get hungry.
  6. Pkeller3 suggested lithium. That's not a bad idea. My concern here is if rechargeable batteries go in another direction. It seems to be a very specific bet that could backfire.
  7. kosmo @ The Soap Boxers suggested that I look for stocks getting beat down by investors. He gave a couple of examples like Ford and BP. It seems like dangerous territory to me. I remember making similar bets on Worldcom and Enron after I had thought they had been beaten down by investors. I don't know if I trust myself to know the situations of an individual company enough to make a bet like that anymore.
  8. Brian suggested international ETFs including countries like Singapore and Brazil. I kind of like that idea. The Brazil mention reminded me that it has been a long time since I looked at investing in BRICs (Brazil, Russia, India, and China). It doesn't qualify as much of a bargain price right now, but the growth is likely to be there in those countries for a long time.
  9. Sandy @ yesiamcheap says she's been watching fertilizers. That sounds a little close to my PowerShares DB Agriculture Fund (symbol: DBA) holding. I like the suggestion in general, but I think I'll stick with the diversification I have in that area.
  10. Kent suggested two stocks that he admitted were "fairly risky for many reasons." The first was a REIT, which I've addressed earlier. The other a pharmaceutical company with a potentially promising medication. Both seem a little too speculative for what I'm looking for.
  11. Mike Zoril says that silver is the way to go. He makes a good pitch about there being a current pricing inefficiency. It was one of the most interesting posts and well worth the read. This makes sense to me. The only thing is that I'm not sure I want to follow the closing of the gap. There's something about just buying an investment and letting it sit without having to babysit it.

In the end, I think I'm going to give Mike Zoril's suggestion a try. Hence he's got $25 coming to him. However, I'm also going to give Contrarian a $10 honorable mention because I'm likely to give the currency trading a try (though through a different avenue than buying the Forex stock). Keep an eye for my email folks.

Posted on May 12, 2011.

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5 Responses to “Announcing the Winner of the $25 “Invest Lazy Man’s Money” Game”

  1. Ah well – I gave it a shot; thanks for the mention! Some very good suggestions in this list: esp. the Currensee idea (I look forward to further info on this company – I’m interested in FOREX myself but it might be too speculative for my blood), investing in the BRIC nations, and putting some funds into fertilizer. This post actually turned out to be a good rundown of potential investment ideas and their pros and cons. Thanks.

  2. “I remember making similar bets on Worldcom and Enron after I had thought they had been beaten down by investors. I don’t know if I trust myself to know the situations of an individual company enough to make a bet like that anymore.”

    Yeah, you definitely want to do your homework. I think the BP situation is far different from Enron, though.

    Where there is fraud, I wouldn’t touch the stock with a ten foot pole, as you can’t trust any of the data from the company.

    With BP, what you really had was fairly normal situation for their industry. Spills happen fairly often. This one was simply much larger and much more publicized. A very bad situation, yes, but likely to have a financial impact that the company could handle, considering their resources. And most importantly, not indicative of a trend – it doesn’t mean that BP will start having monster spills every few years. Remember any big spills from Exxon after the Valdez? There probably were some, but certainly not a string of massive spills.

  3. Max says:

    Forex is very difficult: It´s too easy to click on the buttons but it´s even easier to get our pockets empty in just a few seconds. Most risky market I had ever invested.

  4. I missed the original post. Strange, because I have you in my feedreader! You can keep the $25 but you need to short North American oil (buy a down EFT) next time it spike, go long North American Natural Gas (buy an EFT), short RIM, buy LULU, buy blue-chip transportation stocks like railroads or ships, short coal, and buy investment real estate in bottomed out markets — I can’t tell you which ones are near you though. Some of these were huge successes for me two weeks ago and I wrote about it in All-In: How I Made $800,000 in a Lifetime and $15,000 Last Week Sorry I missed your contest!

  5. Was worth a try. Incidentally my fertilizers stocks are up more than 200% in the past 7 months.

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