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How I Invested My Roth IRA This Year

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About a month ago, I asked you to help me invest my money. I got a lot of great recommendations. As he did last year, Get Rich Slick had the most creative idea, involving options trading. Like last year, I'm sure it will do fantastic. I'm currently not entirely comfortable with options at this stage. I understand the basics of how they work, but I would essentially be putting my money in something that I don't understand. Doesn't Warren Buffett say that you should invest in what you know?

I looked at the other suggestions. A few people mentioned investing in gold. I simply hate gold as an investment. I don't like how it's not a basic necessity of life in today's modern world. It makes as much sense to me as investing in tulips. I know it's stood the test of time, but I think times were different before flat panel TVs and flashy cars. People would use their gold collection to show off their value in society. Today, people use other possessions. I don't see a trend toward people selling their useful possessions for a hunk of gold. If anything it's the other way around.

I do recognize that gold has become a way to hedge inflation and the falling dollar. However, there are other ways to do that with assets that are required in the modern world. The rising price of oil is one such example. If all the gold disappeared from the earth, we could likely make due with copper wiring. If oil disappeared, much of the modern society would have great difficulty recovering. Another example is the raising cost of food. Again, it's a basic necessity that people are required to buy.

For the above two reasons, I heavily considered oil (Powershares DB Oil Fund - Ticker: DBO) and food ETFs (Powershares DB Agriculture - Ticker: DBA). However, in the end, I decided that they were too expensive for me at this stage. They've simply appreciated too much in a small timespan. DBO is up 80% in the last year while DBA is up 45%. So I went with expanding my international exposure. I purchased 75 shares of Vanguard FTSE All-World ex-US ETF (Ticker: VEU), which is essentially unchanged over the last year. I felt I was underweight global stocks in what has increasingly become a global economy.

I want to thank everyone for their help. I found there was tremendous value in reading about different investment strategies.

Last updated on June 14, 2008.

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3 Responses to “How I Invested My Roth IRA This Year”

  1. Tommy says:

    My wife and I put both of our Roth IRAs into ADVDX. So far it’s basically flat, but we should be up about 10% by tax time 2009 since this guy pays out about 15% per year in dividends. It’s not a rocketship to the moon, but it’s at an all time low and pays a nice chunk that’ll double your investment every 5 years or so.

    I looked up some older discussions on the efficacy of the strategy employed by the ADVDX fund managers and many said that it couldn’t last (most of the comments that I could find were from 2005). If you look at the payouts, it shows that they’ve been able to maintain the strategy for about 4 years now and consistently have paid out between 10-15% dividends per year.

    My strategy is to leave this chunk and future Roth IRA chunks to this fund. I’m diversified in the usuals already: Gold, Candian oil trusts, international funds, fossil fuel funds, clean energy funds, large cap us, index etfs, and international funds. I may have to dip into real estate in 2009 or 2010 either via a direct purchase or via a reit/etf if things correct to the mean.

  2. rstlne says:

    I didn’t qualify for Roth IRA last year. Probably won’t qualify this year again but it depends on a number of factors. However, what I have there already mirrors my taxable portfolio. So it has some precious metals, some foreign stocks, some oil stocks, some domestic value stocks, and global short-term bonds.

    Note that I would not put Canadian energy trusts into a Roth IRA. The Canadian government withholds taxes at source so you won’t get any tax benefit by putting those in an IRA.

  3. Tommy,

    The reason why AVDVX is paying out such an abnormal large dividend is that this distribution represents capital gains as well as dividends on the stocks in their portfolios.

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