Never forget these two axioms:
Money frees us, but its pursuit may enslave us.
It’s not how much you have at the end; it’s how much you could have made.
Portfolio Building, Part IV A
Sorry everyone. The posting will be a little sparse for the next weeks as I am in the midst of a ten day stretch in the ICU (12-14 hour stretches/day!) and then a short vacation promised to Mrs. PWT for some well deserved R&R.
“Gotta make money to save money” said some financially literate rapper…probably…or at least he should have…
Let’s delve into some alternative retirement portfolios that may interest you for better long term gains.
Here was the original proposed simple retirement portfolio from a prior post.
30% S&P 500 Index Fund
20% Small Cap Blended Fund
20% Bonds
10% Cash
Note one thing: There is no large cap fund included in the above for the simple reason that the large cap fund in this case is the S&P 500 index fund. Having both would be a complete overlap of the same companies that would raise your risk of loss, but not necessarily enhance your gains beyond having all of that same money in just the S&P 500 index fund.
Let’s assume that you want higher returns than bonds and either eliminate that 20% completely or at least greatly reduce it (making up a figure here arbitrarily) to 5%.
Now, you have 15-20% extra to deal with.
The S&P 500, mid cap, and small cap funds have covered the US extremely well, so one way to go forward could be international funds. (Other options will be discussed in future post [s].) Your risk tolerance should be the guide to how much of that 20% (all? 15%, 10%, 5%., 0% AKA America is where I made my money, America is where I’m investing my money) will be invested in international funds.
Let’s discuss what “international” means for a moment. If you’re investing in solely US companies, don’t accept the criticism that you’re a nativist, xenophobic bigot (though you may be for entirely different reasons…I try not to judge…even those of you who had to look those fancy SAT words used earlier in this sentence…like “criticism”…Oh, were you thinking of some other words?).
Let’s consider your S&P 500 fund and think of some of its largest companies.
Apple
Microsoft
Amazon
Google (Sorry, I’m just never going to call it Alphabet)
Visa
Coca-Cola
Disney
McDonald’s
Walmart
These are all definitely US based companies, But, even if you’ve never traveled abroad (please do when you can though), you must realize that each of these companies generate billions upon billions of dollars from international markets. It’s no different than (Royal Dutch) Shell, BP (British Petroleum), or BMW (Bavarian Motor Works) making money in the US. The lines between what is a purely US company and a “foreign” company has been blurred with ongoing globalization. All multi-billion dollar companies throughout the world are truly international now. It makes sense: supply follow demand…and now with countries around the globe with rising incomes and increasing standards of living, goods from all around the world are being sold…uh, all around the world.
So, in summary, if you’re fearful of being invested in “international” stocks/funds, but are still regretful of not taking advantage of the global economy, don’t fret. You’re doing a lot more international investing/commerce/trade than you think are.
However, if you want into jump of the non-US part of the world pool (I’m not so great at metaphors), read on further…in the next post…
I’d love to hear from any and all of you about your thoughts, so we can all learn from one another.
Please spread the word about this blog to your friends (real and virtual), family, and colleagues. Talk to you soon.
Until next time…