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Play the Annual Invest Lazy Man’s Money Game

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Last year, around this time, I asked readers to invest my money. I've decided to turn this into an annual post - at least as long as I qualify for a Roth IRA.

Requisite Financial Background:

  • I have $4000 from my 2007 Roth IRA to invest. I know I should have my 2008 contribution to invest as well, but I'm still scraping up that money.
  • I do believe in a good asset allocation. I currently have 1/4th of my Roth IRA money in Vanguard Small-Cap (Ticker: VB), 1/4th in Vanguard Total Stock Market (Ticker: VTI), 1/4th in iShares MSCI EAFE Index Fund (Ticker: EFA), 1/8th in Vanguard Health Care ETF (Ticker: VHT), and 1/8th in Technology SPDR (Ticker: XLK)
  • For this exercise don't consider other retirement accounts (assume they are diversified). Also assume that as this is a Roth IRA that I plan to leave this money for 30+ years (I'm 32).
  • I have my money in a TD Ameritrade account, where I pay a $10 commission for each trade. I obviously want to keep my trades down. At some point, I hope to move this money to a Zecco account so that I can trade without paying commissions - just a $30 annual cost.

What I'm looking for:

  • An ETF - I don't mind mutual funds, but I like ETFs better for this brokerage account. I really feel more comfortable with stocks. I'm not looking for a stock, I don't feel that it fits my diversified policy
  • Low expenses - For the most part, I've kept expenses down. I'd like to keep it that way.
  • Something of a good value - I'm not much of a growth investor. I currently favor a sector that is down and out, but not a buggy whip that might never rebound. This isn't a hard and fast rule, but it's a preference.
  • A Standard Investment - I'm not looking to buy options or sell calls. I don't have enough experience in these kinds of investments to be comfortable with them.

Just to be sure, I won't invest in just anything that people comment back with. However, last year I did end up going with the suggestions that people had given (even though I was already thinking in that direction).

Last updated on July 29, 2011.

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21 Responses to “Play the Annual Invest Lazy Man’s Money Game”

  1. I would buy SDY in 1/8 to 1/4 of your portfolio. It covers the high-yielding dividend aristocrats. The 50 or so stocks in the ETF have increased their dividends for at least 25 consecutive years. With yields at around 4% i think SDY is a good long-term investment.

  2. Lazy Man says:

    As always, I forgot to mention a couple of details…

    – The account has around $25,000 of investments in it. It’s not like I have $25, $25, $25, $25 in the ETFs that I outlined and one $4000 would dominate the allocation.
    – I don’t currently have dividend reinvestment set up in the plan. Typically I wait until the next year and grab those dividends with the new deposit and buy new shares again. It usually leaves me with a small cash position less than $100 that I’m okay with. If I’m going with something that produces significant dividends, I need the ETF to do the work of keeping them investing and not putting cash into my account. Yes, I’m that Lazy :-).

  3. RichSlick says:

    Buy 100 XHB @ 22.60 (current price as of post) for $2,260 leave the rest in cash.

    Sell 1 contract XJLAW (January 09 $23 strike) and earn $380 (17.39%)

    On January 16th, XHB will be above or below $23. If it is above $23, you’ll earn an additional $40 minus commissions. If XHB is below $23, you’ve locked in 17.39% and could possibly sell January 2010 $23 strikes.

    If XHB drops significantly, to say $17, buy 100 more shares (with free cash) and sell more calls near the money.

    Rinse, Repeat, Get Rich Slick.

  4. I would save up a little more and buy a share of BRKB. Then hold it until you’re ready to retire. Can’t go wrong with Warren Buffet.

  5. RichSlick says:

    I wish Warren Buffett well but the guy is 78 years old. How much longer do you think he’s going to be around to invest Lazy’s $4000?

    According to the About page, Lazy is 31 years old. If he retires at 55, Warren would be 102 – not unreachable but highly unlikely.

  6. Llama Money says:

    I’ll second SDY and BRKB. I know you said you don’t want an individual stock, but Buffet is a wizard… and insanely consistent. If you don’t like that one, SDY is a great choice for solid companies w/ dividends. Once a year reinvestment of dividends isn’t perfect, but it’s not the end of the world either.

  7. Wow i didn’t know you were that lazy :-)
    If you are adventurously lazy, you could buy some SSO.. Over time ( 3 decades or more) the double leverage could work in your favor ( just hope that the SP does not fall more than 50% in one day).

  8. Lazy Man says:

    I would consider holding companies like Berkshire and to some extent GE to be similar to an ETF. There are typically enough businesses underlying that I’d feel fairly diversified.

    GRS, if I have sell that contract for $380, but keep half of my money in cash (earning a low interest) aren’t I really returning about 10% on my $4,000? It’s not bad between now and January, but I’m not sure it’s breath-taking.

  9. cvd says:

    I’d also recommend XHB if you’re looking for a beaten down sector – though it has come back some this year.

    Another way of getting exposure to the housing/real estate is through REITs, which you can do through an ETF like ICF. You’d definitely want to reinvest dividends.

    You could also get some diversification through some smaller cap foreign investments, again through an ETF like GWX.

  10. RichSlick says:

    No, you’re earning 17% on the money you have invested. You’re earning an additional % on the other money depending on how much your brokerage pays you.

    In order to fully vest at 17% you’d need to invest $4520 and sell two contracts.

    If you look at my recommendations last year (XLE, GDX) you would have done fairly well. The question now is will you doubt me again or invest ;) ?

  11. Buffett has it set up so that smart guys are basically running each company that makes up Berkshire, so when he does die all it means to me is a good chance to buy more, since the panic will drop it I’m sure.

  12. mitchell says:

    i would personally go with 100% of the money (since you already have 25k in there, and its probably already diversely invested) into either O or NLY. both are kind of on the bottom of their markets and looking to grow up, and both lately have been offering dividends alone that fluctuate between 10 and 20% depending on the share price at any given time. O offers monthly dividends, NLY is quarterly. both are REITs with different strategies, and both are mostly unaffected by the real estate bust from a business perspective except for the residual price drops which have already happened and affected the entire blanket area.

  13. Lazy Man says:

    GRS, I’m still not convinced that there’s no downside to options trading. I like the home builder’s idea, I might go with that. I’m just not sure I have the time to commit to the learning process that options trading involves.

  14. RichSlick says:

    Two clicks:

    BUY 100 XHB

    Sit back, relax, drink a margarita and call me in January 2009.

  15. Vanguard REIT Index ETF (VNQ):

    Here’s why:
    1. You’ll achieve diversification (Real Estate has a low correlation with broader market stocks)
    2. Low cost (VNQ’s Net Expense Ratio = 0.12)
    3. Manager Tenure = 12 years
    4. Low relative price (RE was hit hard last year and early this year. Prices have appreciated but I believe the market has over-punished most REIT’s)
    5. You’ll get dividends but, since this is a Roth, tax consequences are not a concern — only the reinvestment is a consideration for you.

    Above all, don’t try to “time the market.” Forecasting, as you know, is a fool’s game…

    “Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.” ~ Lao Tzu

  16. smitty16901 says:


  17. Chuck says:

    1. Put it into the Money Market account for the next 6 months, and then just after Halloween, aka Nov 1st or first Monday after that if it occurs on a weekend, put it into the VPMCX Vanguard Prime Cap Fund. It’s doing OK, right now, but I expect that sector to drop once the Credit Crisis blooms, and then after that it should be really low, and that’s the time to buy.

    Buy when everyone is selling, Sell when everyone else is buying. – Probably from Warren Buffet.
    and right now, everyone seems to think we’ve hit the bottom, ( cept me, of course )

    Good Luck

  18. Buy the GLD ETF!!! Sure, there was some good economic news last week, but there won’t be in the latter part of this year. Gold is set to rocket!

    If one looks at the value that gold SHOULD be at (money supply increase vs. inflation vs. gold supply increase), then you’ll see that gold is really undervalued. $930/ounce is actually not a new record for gold prices, considering inflation.

  19. You’re 31, you’re too young to be lazy with your investments ;)

    For example, your 401k – even with a 100% employer match – will only return 12% over 20 or 30 years.

    If you really want to invest for higher returns, then save up a deposit and buy some investment real-estate.

    Over the same time period, a $30k / 20% deposit NOW will get you a 66% greater capital return than the 401k option or a $36k per year net income (indexed for inflation).

    However, if you are happy to stay lazy, then leave it in the lowest cost Index Fund that you can find and ‘invest’ your time instead in improving your job/income prospects.

  20. Brip Blap says:

    I’ll throw in a vote for DFE. Their blurb: “The investment seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Europe SmallCap Dividend index. The fund employs a passive management (or indexing) investment approach designed to track the performance of the WisdomTree Europe SmallCap Dividend index.” It’s got a yield of 6.42%, it’s out of the US but there’s a good upside for growth in addition to the yield.

    Too bad you aren’t looking for stocks, though – BAC is on sale :)

  21. Bea says:

    Folks make mistakes, plus they might deliberately leave out a discount or
    two while they are processing your purchase.

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