Lazy Man and Money

We Sold a Condo. Here’s the Investment Plan.

by 1 Comment

Sometimes I think this blog is too often a reflection of my money journey. I should focus on things that other people can relate to more. However, that will have to wait for another day. Remember a couple of months ago when I wrote We’re Selling a Condo!

Well…

WE SOLD A CONDO

Ever had a day where there are a couple hundred thousand dollars changed hands? That’s what we had last week. I have to write about a big financial move like that, right?

We had sold a condo a couple of years ago, but we did a 1031 exchange and bought a new investment property. A 1031 exchange is a tax code sale where we avoid paying taxes because the money is going to a new property. We had decided to get out of landlording in Massachusetts – it’s easier to be a landlord in Rhode Island.

I initially thought of doing a 1031 exchange again, but my wife changed my mind. She usually doesn’t weigh in on the financial decisions, but I’m so happy she did. We had an opportunity to sell at the market highs. It was rare timing that the tenant’s lease had ended in the window where prices were high, and everyone was trying to buy because they wanted to lock in a low mortgage.

If we wanted to do a 1031 exchange, it meant buying at market highs. That’s not something that makes me comfortable. Why not cash out, pay the taxes, and see where life takes us for a bit? Perhaps there will be a crash like in 2010, and we’ll buy in low. If not, that’s okay too.

For years we’ve lived almost paycheck-to-paycheck. We were saving money but in retirement accounts. A small part of our income went into the investment properties because they had 15-year mortgages, and the rents weren’t covering expenses. All of this was great for our net worth, but at the end of the month, I’d look and see that we had 90% of our money in retirement and real estate accounts – not very liquid. In fact, among other investments, only about 3% of our money was liquid. It can be dangerous not to have enough liquid cash, but my wife’s government job is relatively secure, and all my income streams are diverse enough to withstand a lot.

Suddenly we have a couple of years of expenses in cash. Finally, we have a true emergency fund.

Where Do We Go From Here?

Having that cash is great, but my wife and I are afraid of spending it. After we pay off the taxes, we’ll invest the money. I hope that the investments throw off enough cash to supplement what we make from our jobs. Perhaps we reinvest that money. Perhaps we use it for fun. Perhaps it goes into home improvements or something like that.

I wasn’t sure how to invest this, so I went back through my archives and found my income investing article. There are some good ideas in that article, but this is how I am planning to invest the money:

Income$250,000
InvestmentPercentageYieldTotal
VYM (High Dividend)25%3.04%$1,900.00
VNQ (REIT)25%3.00%$1,875.00
BND (Bonds)25%3.32%$2,075.00
VTI (Total Market Index)25%1.56%$975.00
Annual100%2.73%$6,825.00
Monthly$568.75

These are all Vanguard ETFs. We have enough money to get Admiral shares of the mutual funds, but I’m more comfortable with the ETFs. From what I read, it doesn’t seem like it would make a big difference. If you think otherwise, please let me know in the comments.

The dollar amounts are a reasonable sample. I’m not sure if we’ll have $250,000 exactly, but I found it helpful to put in an estimate. We have to pay some taxes, but we also have some existing money to contribute to this.

We’ve got two goals that we’re working on:

  1. Preserve the Money

    The hope is that these asset classes are diverse enough to do well in a recession. Here’s how they did in the 2009 crash:
    VYM dropped about 50%
    VNQ dropped about 66%
    BND dropped about 10%
    VTI dropped about 40%

    In total, they combined to drop 40%. That’s… not great. That recession hit real estate and banks hard. Banks usually pay good dividends, so it’s understandable why VYM was hurt badly. In some down markets, like the 20% drop in the broad indexes this year, VYM has done well. Bonds haven’t done well in this environment, but they are only down about 12% compared to those broad markets.

    Since the markets are already down, hopefully, we won’t see anything like 2009. If we do, we’ll try not to sell anything until it recovers. We’ll also try to reinvest at those lower prices.

  2. Getting a Check
    Most of these pay dividends every three months, so the “monthly” number in the chart above isn’t accurate. However, it’s an average. We’ll get more money in some months and less money in others. After the first few months, we’ll have cash in there that we can start to use.

    It’s disappointing that we wouldn’t even get $7,000 in cash. However, the ETFs prices have also gone up over time. There’s a lot more value than just the dividends.

I was curious to see how this portfolio of investments would perform over an extended period. However, I didn’t know of a good tool to help me model and backtest it. Fortunately, the awesome Mike Piper had an answer – the just-as-awesome PortfolioVisualizer.com.

Here’s what it looks like:

(Click for larger version in a new tab.)

I could only model this portfolio back to 2008, as not all these ETFs were around before that. Looking at the bottom of the image, it seems this portfolio has returned 7.60% since the start of 2008. So with a $250,000 portfolio, I could expect average returns of $19,000 per year. I’d have to sell a few shares, but that’s the kind of return that I’m happy with, especially while I try to reduce risk.

I’m still exploring this Portfolio Performance tool and coming across some great information. For example, they publish the maximum negative periods so that you can get an idea of the worst-case scenario (historically):

As you can see, the worst it did was that 40% I estimated above. After that, there was a brief period when COVID first started spreading, and there are the last six months where inflation has been high. That’s not too many downturns of 10%, and that’s still very safe. To put it another way, if it had an average year of making 7.6%, we would be in the positive almost always after that first year.

Introducing the Lazy Man Rule of 20

by 5 Comments

At the start of 2020, I took a fresh look at the stock market and realized that it was up about four times from 2010. Many people who had $250,000 in the markets in 2010 are now millionaires. My wife and I started working before 2000, so we had already saved up a lot in our 401ks and Roth IRAs before 2010.

I was excited by all this progress. The plan was working to perfection. I had a fear… I didn’t want to lose all these gains. However, we weren’t 45 years old, so we still had a decade or two before we started to access these retirement accounts. I wanted to stay invested, but I didn’t want to take the big risks that I did when I was 25. At that time, not only was I young, but the market had collapsed with the Dot Com bust of 2000. It was the perfect time to buy growth stocks.

In 2020, it looked like technology dominated the stock market. The world’s biggest companies were not GE, Walmart, Citibank, and Exxon like they were back in 2000. Instead, we have GAMAF: Google, Apple, Microsoft, Amazon, and Facebook. (I’m substituting Microsoft for Netflix in the popular FAANG acronym.) To reduce tech risk I replaced much of the major total market index ETF I had (VTI) with a high-dividend index ETF (HDV).

I may have lost out on some gains as the pandemic was great for tech stocks. Alternatively, many companies cut their dividends. However, vaccines came out and the boring companies that are in the high-dividend index are thriving. Those boring consumer staples and energy companies are in-demand as they are generally inflation-proof.

There was one other way that I tried to protect our money in 2020. I added more bonds. I haven’t been a big fan of bonds because historically, the best returns come from stocks. I’d rather have 60 years of 10-12% returns than 60 years of 4-6% returns. However, with stocks in a 10-year bull market, I felt it was best to move some money to bonds to diversify with a lower-risk asset. I slowly started to buy Vanguard’s major bond ETF (NASDAQ: BND).

Fast-forward to today and I was either smart or very lucky. I think maybe it was a little of both. HDV is only down about 5% from its highs. VTI is down around 20%. The tech-heavy NASDAQ index has been off of its highs by about 30%. Bonds haven’t been great as they’ve been down about 11% – but they are at least better than VTI.

One of my good friends has an Investment Policy Statement (IPS) that she loves. An IPS puts down in writing how you are going to invest in advance of any market conditions. The beauty is that once you have your philosophy in black and white you simply have to just execute it. I’ve been thinking about creating one for some time, but I’ve been living up to my Lazy Man moniker on that one.

With the market going down and possibly heading further down, I’ve started to think more seriously about what might be in my IPS. One thing I know for sure would be a valuation-based asset allocation. I know a lot of people stick to one asset allocation and change it to be more conservative as they grow older. One old rule of thumb is that you should subtract your age from 100 and have that percentage in stocks. Thus, at age 45 now, I would have 55% in stocks (100-45). I’m an aggressive investor so that rule of thumb doesn’t sound great to me. (It may work beautifully for you though.)

While I do believe that age should be important in asset allocation, I also believe that the market’s valuation should be considered. Here’s a chart of the Shiller P/E:

The Shiller P/E is an indicator of how expensive the market is. The higher the number, the higher the price you are paying for the earnings. One thing that you’ll notice is that for 125 years until the last decade, when the P/E is above 25 there’s been a crash. It can stay up there for a little while. It almost always crashes at 30 until the last ten years or so. It’s crashed down a bit from 37, but could still have some way to go.

That’s why I came up with…

Lazy Man Rule of 20

The Lazy Man Rule of 20 says that my bonds should be around the Shiller P/E minus 20. When the Shiller P/E was 37, I should have had 17% in bonds. In reality, I had around 15% of my money in bonds. (This is a new rule that I’m implementing now, but it would have been nice to have been at 17% bonds.) Now that the Shiller P/E is at 30, I should have around 10% in bonds. I have been selling off bonds and buying stocks (including the NASDAQ at 30% off), but I still have about 11.25% of my money in bonds. The next day that stocks go down, I may sell 1% of my bonds and buy stocks.

Let’s look at how this may have worked in big market bubbles and crashes in the past. I’ll start with my first year out of college in 1998:

  • Bubble of 1998

    At the top of the market in 1999, the Shiller PE hit about 45. Using my rule of 20, I should have 25% of my money in bonds (45-20=25). In hindsight, it should be 100%, but 25% bonds for an aggressive investor at age 25 is a lot. I may have missed the run-up in 1997 and 1998 as I sold stocks to buy that 25% in bonds.

  • Crash of 2000

    As the market starts to crash in 2000, I allow myself to sell the bonds to buy stocks. Bonds performed well from 2000 to 2003, but the stock market was down 9% in 2000, 12% in 2001, and 23% in 2002. By the time it recovers in 2003 the Shiller PE was 23, which means that I only 3% bonds and 97% stocks. That goes to about 7% bonds (Shiller P/E of 27) until we get to 2008.

  • Crash of 2008

    When the crash of 2008 hits, the Shiller P/E goes to 15%. Suddenly, I was allowed to have -5% bonds. Realistically, I can’t do that, so I get to 100% stocks while the market recovers.

  • Bull Run from 2010 to 2020

    During this time, I’m gradually selling stocks and buying bonds. In 2013, I only have 2% bonds. By 2014, I’m up to 5% bonds. In 2015, I’m up to 6.50% bonds. This continues… in 2017 I had 8%, in 2018, I had 13%, in 2019, I have 8%. Finally, in 2000, I’d be back up to 11%.

One of the keys to my Lazy Man Rule of 20 is that I stay invested. I’m not pulling money in and out of the market. Some people claim that you can’t time the market. Is valuation-based asset allocation timing the market? I think it depends on who you ask. I think it is, but I’m using the market itself to tell me what to do.

Make Your Own Rule

I picked my Rule of 20 out of thin air. It was based on my gut feel and I’ve acted when the stock market is up and down. It was only recently that I made the connection that I tend to have bonds that are Shiller P/E minus 20.

If you are a more conservative investor you might want to choose to keep bonds that are equal to Shiller P/E. Or maybe if you are in retirement, you want to have twice the Shiller P/E in bonds. As I get older, I may move from my Rule of 20 to go through all these valuations.

What do you think? Are you going to explore valuation-based asset allocation? If so, let me know what your rules might be in the comments.

Give Your Stocks a Shave

by 3 Comments

This will be a quick article today. My wife got back on Friday after 35 days of getting shots in people’s arms. Now she’s in the full-spring cleaning mode that she missed and I need to join in rather than typing on a computer. I’m expecting to have April’s monthly review ready tomorrow and then get back to a more normal schedule of posting on M-W, or T-Th.

The markets have been going up, up, up for weeks now. When I did my monthly net worth we hit another record – about the 6th month in a row. They’ve been big numbers too. You’d think I’d be very happy about this, but I’m not. I get nervous when the markets seem to get too high. The Shiller P/E (CAPE) ratio is higher than it has been since the crash of 2000. A historically high number for the Shiller PE is usually 25… it’s almost 38. Here’s a chart from Multpl.com.

As you can see these kinds of peaks haven’t ended well in over the last 150 years or so. Of course, the stock market in 1904 isn’t close to being similar to 2021 – it’s very different. There’s a chance that things are different nowadays. However, even if you look at the last ten years, the market looks very expensive.

I have an internal conflict when this happens. Since I’m only 45, I want to stay invested for the next few (hopefully several?) decades. The other side of me says to sell high and buy low. It’s hard to be fully invested with a long-term outlook and still believe that the sky is going to fall at some point soon.

So what can you do?

Shave Your Stocks

When the market reaching new records, I like to shave off some stocks and put it into bonds, almost like dollar cost averaging. It may be as much a mental thing than a math thing – I feel that I’m better prepared for the next crash. In reality, the move is small, but I can do it a lot and it adds up if the markets keep going up and up.

I don’t shave off too much at any given time. It can be a half or a full percent of my holdings. I also look at stocks (usually ETFs) that are near their highs. For example, VTI (Vanguard Total Stock Market Index), VEU (Vanguard FTSE All World ex US ETF), and HDV (iShares Core High Dividend ETF) are three ETFs that I invest in that are currently bumping up against their all-time highs. They are all candidates for me sell a bit and buy a little BND (Vanguard Total Bond Market Index).

This is basically little more than rebalancing your asset allocation – a common thing that most financial experts would endorse. However, I look at my investments more than most people (probably a couple of times a day), so the psychological effect is helpful for me. Most people shouldn’t be as crazy as I am in checking stocks.

For that awesomely large part of the population, I humbly suggest that this is a good time to check in on your asset allocation if you haven’t in awhile. They may not be where they were a few months ago. They may not be where you want them with the current market valuation.

What’s in My Lazy Portfolio?

by 5 Comments

Usually a “lazy portfolio” refers to investing in two or three well-diversified index funds. You can be very diversified if you invested in VTI (Vanguard Total Market), VEU (Vanguard Ex-US), and BND (Vanguard Total Bond Market). You could divide it up 30-30-40 and never touch it again (though you should continue to try to add new money to the investment). Historically, that’s been a very safe and profitable strategy.

However, since I’m Lazy Man, my “Lazy Portfolio” is a little different. It’s actually not so lazy at all. I enjoying picking satellite stocks. So while I may recommend people go with the traditional lazy portfolio because it’s easy, I don’t take my own advice.

I think it’s always interesting when a personal finance writer says one thing, and then does something different. In my case, I do something different for three reasons:

1. I’m doing well with my satellite stocks. Here’s what my actively managed portfolio performance looks like:

Personal Capital - Portfolio Performance

2. I don’t have many hobbies, but one of them is following the markets and seeing if I can make a percentage extra or two.

3. I have significant protection with my core holdings. I’m only managing retirement money, so I don’t have to worry about tax consequences. My wife has more retirement money in her government TSP which has a lazy portfolio allocation. She has a government pension providing long-term income security. We have investment properties that can provide us with income in the future. The satellite stocks in general make up a small amount of our overall portfolio.

Today, I thought I’d pull back the curtain and explain what my investments are and how they got that way. I think you’ll find that it is far from a perfect portfolio.

What’s in My Lazy Portfolio?

lazy portfolio

This mess of stocks and ETF doesn’t make much sense at the first glance. I have a lot of explaining to do. So here goes:

Vanguard Emerging Markets ETF (VWO)

The only reason why I have more in emerging markets than VEU (see below) is that it has performed worse and I feel there’s more opportunity for growth in those markets in the long-term. This is a long-term position, so I’m not too worried about COVID hitting those countries hard, right now.

Vanguard FTSE All World ex US ETF (VEU)

This holding makes up another large chunk of my international stock holdings. These first two holdings are 24% of my portfolio. With some of the stocks below, my international holdings are around 30% overall.

Vanguard Total Bond Market ETF (BND)

Whenever market indicators point towards a stock market crash, I increase the amount of money I have in bonds. I usually keep less than 5% of my portfolio in this, because I’ve got time and other safety nets. However, I’ve been selling off the indexes as they reach new highs and adding more bonds.

I did this strategy in early 2020 and when the markets crashed with COVID, I was able to sell bonds (which didn’t drop as much) and buy stocks at nearly half the price they are today. I know that I can’t call the bottom, so every time the stock market dropped about 10%, I would sell another 2% of bonds and buy-in.

Twitter (TWTR)

I invested in Twitter a long time ago, with most of the shares around $15. I sold some at $40, $45, $50, $60, and $75. Even though I keep selling shares, the overall value has grown, so it’s still a large percentage of my portfolio. Perhaps I should have sold off more, but I think it’s still undervalued.

iShares Core High Dividend ETF (HDV)

This forms part of my core United States index holdings. I like high dividend ETFs for three reasons:

1. They produce solid income. HDV has about a 3% yield right now.
2. They are typically more boring companies that earn good cash and profits which I feel protects me in most market crashes.
3. They help me remove tech risk from my portfolio. As you’ll see with this list of stocks, I’ve got a lot of technology and the market indexes have plenty of tech at the top as well.

Invesco Solar ETF (TAN)

I bought this years ago when I got solar panels on my house. The last year has seen solar stocks skyrocket. I could have sold some off and redistributed the money across broader indexes, but I don’t mind holding solar stocks for another 20, 30, or 40 years (if I’m still around that long).

Vanguard Small-Cap Index Fund ETF (VB)

Most of the big indexes (VTI, I’m looking at you) strongly favor big companies. However, over the long haul, smaller companies tend to perform better. This is a way to give me a little more diversity and better performance than if I had just bought VTI alone. My overall US stocks are still mostly large-cap, so an argument could be made that I should increase this allocation.

Alphabet Class C (GOOG) and Alphabet Class A (GOOGL)

I bought Google a long time ago and it split into two voter classes. These never differ by much and it’s about 9.5% of my portfolio which would bump it up the list towards the top.

I decided not to touch it and it has performed well. Investing in Google is almost like investing in the entire internet and smartphone markets. It almost feels like its own index fund.

Vanguard Total Stock Market Index Fund ETF (VTI)

Finally, the staple of most lazy portfolios shows up. I used to have a lot more in this, but I sold a lot and put in HDV (see above). If you were to combine my VTI, HDV, and VB holdings, that’s 17% of my portfolio in US indexes.

Snap Inc (SNAP)

I bought at lot SNAP at under $10. Much like Twitter, even though sold off more than half, it is still a significant holding. Whenever SNAP and Twitter reach new highs, I sell off about 5% or 10%. At this point, I’m playing with the house’s money.

United States Oil Fund LP (USO)

I had been buying this oil ETF for far too long. I lost a ton of money when COVID hit and the price of oil went negative. However, I continued to dollar cost average into it. About a month ago, I sold off half since it I was finally solidly in the profitable area. I am holding to the rest with the idea that vaccines will spur a lot of pent-up demand for travel.

Over the long-term, I’d rather not invest in the oil industry.

Apple Inc (AAPL)

I bought some of these several years ago and sold off enough to just play with the house’s money. It’s split once or twice as the company became the first in the US to hit 1T and 2T in market cap.

There’s really no need for me to keep this since it’s well represented in the indexes. It feels like a safe holding though.

IBM (IBM)

I bought this because I thought that Watson would revolutionize the world. It didn’t happen, but IBM has paid out 5% dividends (or more) for years that I’ve held it. In theory, if I put my entirely portfolio in this stock, I could live off the dividends as it would be higher than the 4% rule

General Electric (GE)

I bought this years ago because I thought it was cheap after it had followed it a lot. Then it fell more and more. I bought more and more, dollar cost averaging in, and I’m up about 30% at this point. I have sold some since I’m up. I would sell more, but the pandemic hit their businesses harder than many companies. I’m hopeful that when things fully open up, this stock will out-perform.

Vanguard Real Estate Index Fund ETF (VNQ)

I like to diversify with some real estate holdings. This pays a decent dividend of 3.88% as well.

iShares MSCI Frontier and Select EM ETF (FM)

Yes, 1.5% of my money is in frontier markets. These are countries like Kuwait, Vietnam, Morocco, Kenya, Romania, and Nigeria.

It has not performed well. I’m down about 5.71%. This is a very, very long-term growth investment. It also diversifies my holdings so that I’m invested in probably 100 countries.

Alibaba (BABA)

There was one day (around 2015 or so) when the stock market dropped a bunch for just about 10 minutes. I had a little liquid money and saw that Alibaba dropped more than most. I don’t mind having 1% of my money in “the Amazon of China.”

Lyft Inc (LYFT)

When Lyft dropped to being worth about $8 billion dollars I thought that Google (or another company work on self-driving technology) might acquire it. That didn’t happen, but Lyft’s stock has jumped a lot. I’m not sure how ride-sharing will be profitable as it is now, so I’ve been selling off shares to protect myself if it should drop to $0.

Altria Group (MO)

I was in a forum a couple of months ago and nearly everyone said this was the best dividend investment paying around 8.5%. They had some good news in the last earnings and I’m up 25%. It’s better to be lucky than good sometimes I guess.

I’m very morally conflicted about investing in cigarettes and will probably sell this off soon.

Pinterest Inc (PINS)

This was another case of being lucky. I saw it get down to about $18 a share and thought that it was much less than the IPO, so let’s invest a little. It has been up nearly 500%, so I sold off some to play with the house’s money. (If you hadn’t noticed, this is something I do a lot.)

Kraft Heinz Co (KHC)

Warren Buffett gave up on the company, so I jumped in at a share price lower than him. It has a dividend yield of 4% and my cost basis is about $22 a share (it’s trading at $39). I have been happy with the returns for a couple of years.

Ford Motor Company (F)

I bought Ford because it was paying a 12% dividend due to the COVID-19 impact on its stock price. Ford needed to keep the money to run operations and decided to eliminate the dividend. What could have been a disaster has turned into a blessing, the stock is up 80% from where I bought it.

AT&T Inc. (T)

I bought this about a year ago for its 7.5% dividend yield. I felt like people would still need their cell phones and cable service in a pandemic. It also looks like HBO Max is a good streaming service. The stock itself is up 7%, so with the yield, it is looking good.

Under Armour Inc Class C (UA)

I bought a few shares at around $6.50 when it was looking like a disaster. It’s around $19 now. I sold a little to play with the house’s money once again. It used to be a $20 billion-dollar company, so maybe there’s still room for it to grow.

Carnival Corp (CCL), Norwegian Cruise Line Holdings Ltd (NCLH), Royal Caribbean Cruises Ltd (RCL)

I bought a little of each of the three major cruise lines when they tank due to COVID. At the time it was less than half of a percent of my portfolio. I just wasn’t sure the entire industry would go away forever. Now they are a little over 1% of my portfolio. I’ve been selling some of them off at highs and it’s close to playing with the house’s money.

Boeing Co (BA)

Similar to the cruise lines, I bought in at $109 as it was a bargain from its $300+ highs. I was counting on COVID getting solved at some point and them being able to figure out their plane troubles. I sold some to play with the house’s money or this would be a bigger percentage.

Uber Technologies Inc (UBER)

Uber seems to lose billions of dollars a year. Still, I thought that at a $50 billion market cap, it had significant assets and would be acquired if nothing else. Guess what? Sold some for house’s money sake again.

Cash – Cash – Cash! (Cash)

I don’t like to keep a lot of cash around. I’ve been putting most of it into BND, so I can at least earn some income on the dividends.

Lazy Man’s Portfolio Recap

So that’s the rundown of how I invested my money. As you can tell, things got a little messy in some places and I got lucky in other places. The overall trend right now is to try to sell some of the individual holdings at highs and invest them in index funds.

I would also be willing to invest in new satellite stocks, but I haven’t found anything that’s a good value recently. Most of the companies that seem cheap to me (AT&T for example) aren’t likely to grow much. That’s another reason why I am content to keep the money invested in a place in bonds or dividend stocks while I wait to find a new opportunity.

The Three Tinas of COVID

by 3 Comments

How many Tinas do you have in your life? I have a couple in real life, but I hadn’t had much interaction with them due to COVID-19. Instead, they’ve been replaced by three new Tinas. Two, I will briefly mention, but the third Tina is what we are all here to focus on today.

Giratina

Tina

Giratina is one of almost a thousand Pokemon. The kids love Pokemon. We recently watched a movie starting this character. It’s one of the more important Pokemon in their Pokemon Go games.

Each Pokemon has its own brief description and fittingly, Giratina’s is, “This Pokémon is said to live in a world on the reverse side of ours, where common knowledge is distorted and strange.”

Tina Rex

Sometime during COVID (no one knows the timing for sure because time ceased to exist), Cartoon Network inked a deal to show one million episodes of The Amazing World of Gumball. That last fact is probably not true, but it would seem true if you had kids who were a fan of the network as they grew out of Nickelodeon, PBS, and Disney.

Tina Rex, a Tyrannosaurus Rex, is a side character in the show. She’s the school’s bully.

You didn’t come here to read about cartoon Tinas. You (hopefully) didn’t even come here to read about bullying or living in a world where common knowledge is distorted and strange. We’ve got enough of that in 2020, right?

Maybe you’ll be more interested in my investing friend, TINA:

There Is No Alternative

While “There Is No Alternative” can be used in many different contexts, it’s often been used in the investing markets.

Loosely, it means that one has to deal with a sub-optimal asset allocation of investing because other investments aren’t very viable or unappealing. For example, putting money in a savings bank for a number of years hasn’t paid very much interest. Many 2-year Certificate of Deposit rates earn about 0.75%. That’s far less than the typical annual inflation.

Interest rates in bonds are down too. My go-to bond fund is the Vanguard ETF (BND). It’s paying a 1.16% SEC yield. I don’t completely understand the bond markets, but from what I do understand it seems like a very bad time for them as well.

You can look at alternative investments. Gold is up 27% this year. It’s close or at its all-time highs. Bitcoin is also close or at all-time highs. Real estate may be an option, but buying physical houses is competitive with all-time low mortgage rates. REITs (Real Estate Investment Trusts) may be better, but I’m worried about the long-term effect of the lockdown. It’s not an easy time to be asking people or businesses to pay their rent on time.

You could invest in commodities. However, earlier this year the value of oil went negative. It cost more to store oil than get someone to buy it from you to use it. It’s still a messy situation and will probably continue to be one until travel picks up.

That leaves stocks. The S&P 500 is hitting new highs. Markets internationally are doing well too. Everything almost seems to be at highs. There are some stocks that are still in difficult shape. For example, airlines and cruise ships are notably not doing well. However, they aren’t doing as bad as they used to be. Many have anticipated travel to ramp up around the middle of 2021 with better weather, vaccines, and leaders looking to take charge.

As I look at my portfolio, I see a true TINA situation. I have investment games of 20% this year, which has been compounding on investment games from the previous 10 years. I want to be more conservative because these markets scare me. However, it’s hard for me to go to investments with so little upside.

I look at the markets like it’s a Magic Eye poster waiting for the perfect answer to appear. The closest I’ve come are the solutions in my recent article about income investing. I’ve been steadily moving more investments more to dividend funds. For now, that’s about the best I can do to feel a little safer. Other people may find paying off their mortgages to produce a better return. A rational person would tell me to stop looking at the markets and my portfolio and do something to bring in more money. (So far efforts to bring in more money haven’t worked out very well.)

Is anyone else looking at their investments and thinking, “Where do we go from here?”

P.S. I should have mentioned this TINA I love, but it didn’t fit with the article.