Jim at Bargaineering.com has been compiling a list of best and worst money moves. I’ve been putting it off simply because it’s pretty hard to go back and analyze over the years. Do I include the set of 1986 Celtics Basketball cards that have appreciated some three hundred times their value? I’ve decided not to as it was pure speculation and luck. Do I include all the bad dates I went on before I found “the one”? That was part of the journey, so I’m not going to include that. Here’s what’s left:

Best Moves

• Investing in a Internet stock at the IPO price in 1999. I worked at a popular Internet company, but didn’t get in for the pre-IPO prices. However, they let me buy some shares at the IPO price with no restriction on when I could sell. When I look back it seems kind of shady. Anyway, I made 10K, which out of college is a good thing.

• Moved to San Mateo County. I know you are thinking… what?!?! It has a HUGE cost of living. The money my fiancee and I are making so much more than make up for it. Here’s the scary part… Since we moved out for her job, I had to take one of the first job I could find or lose money each day. As a software engineer, I could probably command another 20% if I decided to switch to another job.

Worst Moves

• Remember that Internet stock that I mentioned above? Well I continued to invest in the Employee Stock Purchase Plan and just barely broke even after the dot-com bust. I also used that money and bought other Internet stocks. Like most, I didn’t get out in time. I did transfer a good chunk of money into bigger technology companies like Lucent and Worldcom. Ouch!

• Purchase that new sports car. It was a reasonably priced car as far sports cars go – under $30,000. I had cars that would barely run previous to that. I went to the opposite end of the extreme. If I had saved that some of that money and bought a condo at the time, I would have had a much better bottom line right now.

Joe of Bright Investing writes an article on mortgage accelerators. I didn’t realize such things existed. Apparently the business sets up extra electronic payments to aid you in pay off your mortgage early. Most banks allow you to do the same thing for free, so it’s a pretty bad idea for anyone except the accelators.

In the comments, Joe and I suggest that for many people, with good credit, who have bought homes in the last few years, it may be best to take that extra money and invest over the 20-25 year span and then buy the property outright. The advantage is that it’s possible to earn 8-10% interest which compounds much better over the long term than some mortgages. Plus you can invest the DIY Mortgage Accelerator money in a way that it can help you if you should ever experience a hardship, such as losing your job.

Back some time ago, my fiancee and I were on vacation in Aruba, when we took in a timeshare tour for the Marriott. Over the years, timeshares have gotten terrible press. My parents and her parents laughed at the idea. Still, my very smart friends had purchased them, and a large publicly traded company like the Marriott couldn’t steer us wrong right? She decided to buy… to this day we aren’t so sure if she made the right move.

The idea was particularly tempting to her for a few reasons. She gets an enormous 6 weeks of vacation, so why not have a place to go to every year at a discount? She had just gotten a big promotion and, after growing up deprived of many of the luxuries that her peers enjoyed, saw this as an opportunity to make up for years of getting a “Nyke” shoes while everyone else got Nikes. Lastly, it was billed as a great investment opportunity. After all, it is a deeded property and can be passed on in a will. We were also told that RedWeek.com and Ebay would return profits. So she decided to go for it.

In retrospect, she’s not sure she’d do it again. I think half the reason is that I don’t have the vacation time she does. She also can’t get her friends to go – again I have no clue why as I’d love to take a vacation in Aruba if I just had to pay airfare. We also found that few people purchase vacations from RedWeek – and again I have no clue why as there really are some exceptional deals there. I think there’s a bad taste in her mouth from that.

And finally we learned about for sale by-owner timeshare resales on sites like SellMyTimeshareNOW. These are the same thing as regular timeshares but for much less as you avoid paying the marketing costs and sales commissions that are rolled into the price when buying wholesale from a resort.

So I ask, what are your opinions on timeshares from reputable companies? Are they a scam, an investment, or a little of both?

In my previous post, I detailed how I would allocate a hypothetical $100,000 portfolio. I had a few goals in mind when I was creating the portfolio:

1. Keep expenses low. Some expense ratios are over 1%, which is a high price to pay if your balanced portfolio returns 8-10% a year.
2. I’m young, so I want a large percentage to be in stocks and just a little in bonds in case we hit a bear market as a minor hedge.
3. I want to be diversified. I had bought individual stocks in the past, but it seemed to be closer to gambling than investing for me. If I had enough money to spread it around amongst many individual stocks, than perhaps I would do that. For this exercise though, it doesn’t make sense for me.

For those that need the refresher, here was the portfolio that I decided on over 4 years ago:

– iShares Russell 2000 Index (IWM) – $25,000
– SPDRs (SPY) – $25,000
– Vanguard Total Intl Stock Index (VGTSX) – $10,000
– Technology Select Sector SPDR (XLK) – $10,000
– Utilities Select Sector SPDR (XLU) – $10,000
– iShares Dow Jones US Real Estate (IYR) – $10,000
– Vanguard Total Bond Market Index Adm (VBTLX) – $10,000

And my new portfolio if I could design it today would be:

Domestic Stock ($35,000)
– Vanguard Total Stock Market Index ETF (VTI) – $25,000
– iShares Russell 2000 Index (IWM) or Vanguard Small Cap Index ETF (VB) – $5,000
– SPDRs (SPY) – $5,000

International Stock ($20,000)
– iShares Global S&P 100 (IOO) – $5,000
– Vanguard Emerging Markets ETF (VWO) – $5,000
– Vanguard European Stock (VGK) – $5,000
– PowerShares China (PGJ) – $5,000

Sectors ($25,000)
– Sector Bets: I typically screen for some under performing sectors. That’s why I stumbled into utilities 4 years ago. That would have been one of my best performers. I love technology so that’s a must for me. I’d take a health care one as an aging baby boomer play. Energy as a hedge against rising gas prices in the future sounds like a smart plan. I’d grab a financial one as well – what’s a better place to put your money than with people who know money?

Real Estate ($10,000)
– Vanguard REIT Index (VNX) – $10,000

Domestic Bonds ($10,000)
– iShares Lehman Aggregate Bond Fund (AGG) or Vanguard Total Bond Market Index Adm (VBTLX) – $10,000

That’s how I’d allocate things today if I could. Finally, it’s disclaimer time. Please don’t consider this financial advice and see your own financial advisor before investing. I’m first and foremost an idiot.

City Girl ‘s Financial Blog has reminded me about asset allocation. Not that one should ever forget about asset allocation, but I forgot about July 31, 2002. It’s when I decided the market was at a low. I picked that time to start a Yahoo Finance Portfolio of $100,000 to see how it would fair if I invested it like I would for the long term. I didn’t go back and rebalance as I probably should have, but 4.25 years later this is a good time to asses the experiment.

Here’s the initial portfolio:

– iShares Russell 2000 Index (IWM) – $25,000
– SPDRs (SPY) – $25,000
– Vanguard Total Intl Stock Index (VGTSX) – $10,000
– Technology Select Sector SPDR (XLK) – $10,000
– Utilities Select Sector SPDR (XLU) – $10,000
– iShares Dow Jones US Real Estate (IYR) – $10,000
– Vanguard Total Bond Market Index Adm (VBTLX) – $10,000

That’s a pretty simplistic portfolio and now I’m not sure I’d do it the same. It’s returned $65,000+ over the last 4.25 years or about a 12.8% return. That’s a pretty good deal, but I’m comparing a call that was close to the bottom of the market to time that might be close to the top of the market.

So if I had to do it again, I’d put some international exposure into the mix. At the time, experts said that 10% was about the norm. I thought it was weird to invest 90% in your own country, but there’s history performance behind the logic. Nowadays, it seems as if the experts are more open to bigger investments overseas. I would agree with putting about 20% or maybe a little more of your investments overseas.

I also would diversify my stock holdings some. In my opinion, there’s really little reason to invest in small caps, large caps, and the total market separately. I should probably have put a good amount in the total market (maybe $30,000) and small amounts in the small and large caps (maybe $10,000 each).

I’n the next couple of posts, I’ll let you know how I’d set my asset allocation today. I think I’m 4+ years smarter, so we’ll see if I learned anything.