Milestone: @Brexit and MLA

20160624, Friday

1. “losses loom larger than corresponding gains”
2. “losses and disadvantages have greater impact on preferences than gains and advantages”
3. “people feel losses more deeply than gains of the same value”
4. “if you look at your investments closely/frequently, you will miss the bigger picture”

Read more:
Investment-MyopicLossAversion0.pdf
Investment-MyopicLossAversion1.pdf
Investment-MyopicLossAversion.pdf
loss-aversion.behaviouralfinance
…

Related Posts:
Myopic Loss Aversion
https://blindcaveman.wordpress.com/tag/finance/

1d

5d

1y

3y

5y

10y

TechGiant

Fidelity Freedom

TRowe Price

Investment: Sector Analysis-2015

The Health Care Sector encompasses two main industry groups. The first includes companies who manufacture health care equipment and supplies or provide health care related services, including distributors of health care products, providers of basic health-care services, and owners and operators of health care facilities and organizations. The second regroups companies primarily involved in the research, development, production and marketing of pharmaceuticals and biotechnology products.

The Information Technology Sector covers the following general areas: firstly, Technology Software & Services, including companies that primarily develop software in various fields such as the Internet, applications, systems, databases management and/or home entertainment, and companies that provide information technology consulting and services, as well as data processing and outsourced services; secondly Technology Hardware & Equipment, including manufacturers and distributors of communications equipment, computers & peripherals, electronic equipment and related instruments; and thirdly, Semiconductors & Semiconductor Equipment Manufacturers.

The Energy Sector comprises companies whose businesses are dominated by either of the following activities: The construction or provision of oil rigs, drilling equipment and other energy related service and equipment, including seismic data collection. Companies engaged in the exploration, production, marketing, refining and/or transportation of oil and gas products, coal and other consumable fuels.

The Financial Sector contains companies involved in activities such as banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, financial investment, real estate investment trusts (REITs), as well as companies engaged in real estate management & development.

The Industrials Sector includes companies whose businesses are dominated by one of the following activities: The manufacture and distribution of capital goods, including aerospace & defense, construction, engineering & building products, electrical equipment and industrial machinery. The provision of commercial services and supplies, including printing, employment, environmental and office services. The provision of transportation services, including airlines, couriers, marine, road & rail and transportation infrastructure.

The Telecommunications Services Sector contains companies that provide communications services primarily through a fixed-line, cellular, wireless, high bandwidth and/or fiber optic cable network.

SPX Relationship/Effect in % to “Top Performing Funds”

I rebalanced all my portfolio in August 29th 2014 and at that time the market was still at positive momentum.  Later I found out that I lost somewhere around 6% across all my holdings in mid October.  6% is not much when the amount is small but when your portfolio is already big, 6% is not a good number.

I was curious of the actual effect of S&P 500 towards the top performing funds, the results are in Table 1.

Disclaimer:
The information mentioned here is for educational purposes only.  Do not be influenced to invest on any funds mentioned below without doing your own comprehensive research.

SPXAnalysis-3Months-2014August-October.xlsm [33.5MB]
http://blindcaveman.wordpress.com/tag/finance/ 

Table 1: Date range: August 29th and October 17th: [45L]

SPX Comparison 3Month-2014August-October

SPX-Healthcare-3Month-2014August-October

SPX-Fidelity Freedom Funds 3Month-2014August-October

TRowe Price 3Month-2014August-October

S&P 500

Step by Step:
1. Get portfolio chart comparison-3 months
2. Get portfolio raw data-10 years
3. Identify funds which has a lower margin of safety
4. Get balance of portfolio at specific date August 29 2014
5. Get balance of portfolio at specific date October 17, 2014
6. Answer the following questions:
   A. % relationship of SPX to Portfolio when S&P 500 drops 116 points/ –6.18%
   B. Which fund posted the lowest margin of safety?
7. Repeat Step 1-7 every 3 months

dysrationalia

Dysrationalia – "the inability to think and behave rationally despite high intelligence"

Rationalism is a belief that one’s opinions or actions should be based on reason and knowledge rather than emotional responses

A rational person thinks
1. clearly
2. sensibly
3. logically.

rationality is not the same as intelligence.
smart people can do dumb things

two principal causes of dysrationalia

1. processing problem
2. content problem

Myside Bias – A common error that occurs with everyday thinking is Myside Bias — the tendency for people to evaluate evidence, generate evidence, and test hypotheses in a manner biased toward their own opinions.

Dysrationalia.pdf

Myopic Loss Aversion

Are you be willing to accept the following offer:
“a 50 percent chance to win $200 and a 50 percent chance to lose $100”.

1. “losses loom larger than corresponding gains”
2. “losses and disadvantages have greater impact on preferences than gains and advantages”
3. “people feel losses more deeply than gains of the same value”
4. “if you look at your investments closely/frequently, you will miss the bigger picture”

Read more:
Investment-MyopicLossAversion0.pdf
Investment-MyopicLossAversion1.pdf
Investment-MyopicLossAversion.pdf
loss-aversion.behaviouralfinance
…

Related Posts:
http://blindcaveman.wordpress.com/tag/finance/

NOTES: Restructuring Individual Retirement Account; Rule of 72

I have plenty of spare time now since the house is already empty, 2 kids are already in college and it is just me and my wife for now. My strategy has changed a little bit and I need to reassess my financial strategy.  Me and my wife will be retiring in 10 years or so and would love to do it within 10 years so that I can fulfill my true vocation [it is a secret, don’t ask me].  In order for me to retire from my job, I need to restructure my finances so that I will not have to work hard to fund my retirement projects.

ReadMe:

https://ucfocusonyourfuture.mysecurebenefitsportal.com/financialfitnesslibrary/resource/85
https://www.mysavingsatwork.com/taxexempt/assets/370190_FidelityBrokerageLink.pdf
https://www.fidelity.com/insights/investing-ideas/overview
https://www.fidelity.com/insights/investing-ideas/the-right-way-to-pick-a-mutual-fund
https://www.fidelity.com/insights/investing-ideas/7-stocks-for-the-next-15-years
https://www.fidelity.com/insights/personal-finance/4-key-numbers-in-your-financial-life
https://www.fidelity.com/insights/investing-ideas/how-life-stages-shape-investing
http://en.wikipedia.org/wiki/Rule_of_72
http://www.moneychimp.com/features/rule72.htm
http://www.moneychimp.com/features/rule72_why.htm
https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/compound-interest-tutorial/v/the-rule-of-72-for-compound-interest
What Are Mutual Funds
Type of Funds
Fidelity Mutual Fund Research
Top Fidelity Funds
Evaluating Investment Rate of Returns
Personal Rate of Return

Picking a Mutual Fund
Step 1: Determine why I want or need a new fund
Step 2: Find the funds or ETFs that meet my needs
Step 3: Learn the story of the fund
Step 4: Compare the fund to its peers, then check returns
Step 5: Choose the finalists, read the prospectuses, check with the analysts
Step 6: Check under the hood

Picking a Stock for Long Term Investments
[Not all stocks, however, are suitable long-term buys. A company you expect to be wedded to for 15 years should have six characteristics:]
1. a product that can endure and aren’t fads
2. a history of leaders who can adapt
3. a strong balance sheet
4. a benign competitive environment
5. a track record of innovation balanced by vigilance against taking on too much risk
6. a strategy that looks beyond the next year and certainly beyond the next quarter.

4 Key Financial Finance Health Index
Credit Score
Retirement Savings
Emergency Savings
Net Worth

My Fidelity Account Health Checklist:
1. Check the current balance.
Go To Your Fidelity Account->Account & Trade Portfolio->Statements->View Online Statements->Selelct YTD->Click Retrieve Statement
2. Check the current Personal Rate of Return. [Do this in December of each year]
3. Understand Rule of 72. [use spreadsheet below to simulate]
4. Create a Brokerage Link Account to have more investing choices.
5. Get Top Performing Mutual Fund List
[Fidelity Fund List By Performance]
[ETrade Fund List Screener] Select-All Groups, Performance-5Year Top20, ShowMe 4-5 Stars, Check-NoLoad/No Transaction Fee, View Matches, Click Export to Excel
6. Exchange low performing funds from your research.
7. Fund Brokerage Account
8. Invest Brokerage Account with Top Performing Funds
9. Repeat Step 1 to Step 7 every 90 Days

Excel – Simulator-PersonalFinance.xlsx
https://dl.dropboxusercontent.com/u/80421698/Simulator-PersonalFinance.xlsx

Related Finance Topics:
http://blindcaveman.wordpress.com/tag/finance/ 

Netbenefits Health Check [individual performance]
1. Login to https://netbenefits.fidelity.com/NBLogin
2. Click the Portfolio Position Link [top right area]
3. Click each Ticker Symbol [+] sign to view the performance of each investment.

Netbenefits Health Check [overall performance]
1. Login to https://netbenefits.fidelity.com/NBLogin
2. Click Quick Links–>Transaction History–>Summary-Year to Date Change
3. Click Quick Links–>Transaction History–>Investments–>Performance & Research

5 Warren Buffett investing don’ts

5 Warren Buffett investing don’ts

No. 1: Don’t let world events affect your investing decisions
Buffett said even if he knew a big war was unavoidable, “I will still be buying stock. You’re going to invest your money in something over time. The one thing you can be sure of is if we went into some very major war, the value of money would go down. … That’s happened in virtually every war that I’m aware of. … The last thing you want to do is hold money during a war. You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War II, the stock market advanced. The stock market is going to advance over time.”

No. 2: Don’t feel bad when stocks go down
On a day that global stocks markets were reeling from worries that the Ukraine situation could lead to war, Buffett said, “When I got up this morning, I actually looked at a stock on the computer, on the trades in London, that we’re buying and it’s down and I felt good. … We were buying it on Friday and it’s cheaper this morning and that’s good news.” Will he buy more? “Absolutely.”

No. 3: Don’t think you have to be an expert to profit from stock
“The stock market just offers you so many opportunities, thousands and thousands of different businesses. You don’t have to be an expert on every one of them. You don’t need to be an expert on 10 percent of them even. You just have to have some conviction that either a given company, or a group of companies … are likely to make more money five or 10 or 20 years from now than they’re earning now. And that is not a difficult decision to come to.” And if you have no expertise at all, Buffett recommends a low-cost index fund that tracks the S&P 500 ($INX). “Keeping costs to a minimum is enormously important in investing. … If you’re in effect paying out 1 or 2 percent annually of your portfolio, that’s a big, big tax that you don’t have to pay.”

No. 4: Don’t go for the quick profit
Asked if “activist investors” are really acting in the best interests of targeted companies and their shareholders, Buffett replied, “Generally speaking, they are interested in making a quick profit and there’s no law against making quick profits. But our whole attitude in our own business, and what we like to see with the businesses we own stock in, is we want to run them for the people who are going to stay in rather than the people who are going to get out. At any given time, you can make more money, usually, selling the company. … The answer isn’t to sell the company. The answer is to keep running the company well. … I could do certain things to jiggle up the price of Berkshire (BRKB) in the short run. It would not be good for the company over five or 10 years.”

No. 5: Don’t put your money into Bitcoins for the long run
“It’s not a currency. It does not meet the test of a currency. I wouldn’t be surprised if it’s not around in 10 or 20 years. … It is not a durable means of exchange. It’s not a store of value. … It’s been a speculative — a very speculative — kind of Buck Rogers-type thing, and people buy and sell them because they hope they go up or down just like they did with tulip bulbs a long time ago.”

Simulator-Personal Finance

I came across an investing book last weekend and the author mentioned 3 things that caught my attention.  He said that there are only 3 things you need to keep in mind when you want to attain your financial goals.

1. How long you invest?
2. How much you invest?
3. What rate of return you get on your investments?

I’ve compiled a few spreadsheets to help my financial journey and I would like to share this to my readers.  I did not write a detailed step by step on how to use the spreadsheet but it is not rocket science to follow.

Please share your wealth when you reach your seven figures.  The spreadsheet includes the following:
1. Timeline
2. Budget
3. Age Table
4. Mortgage Calculator
5. Investment Calculator
6. Millionaire Calculator
7. Dollar to Peso converter [PHP]

https://dl.dropboxusercontent.com/u/80421698/Simulator-PersonalFinance.xlsx
https://dl.dropboxusercontent.com/u/80421698/FundReport-JAGTX-20150228.pdf
https://dl.dropboxusercontent.com/u/80421698/FundReport-JAGLX-20150228.pdf

The author also mentioned 4 key things in life that is worth examining:
1. Health
2. Wealth
3. Social Life
4. Personal Life

I’m not done with the book yet so I can’t really write a summary.  But even by just contemplating with the 4 items above can yield to a better insight in life.

I’ve deleted #3 a few months to make my life a lot simpler.  Yes, I have no social interaction except the people at work and WordPress [if it counts].