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Monthly Archives: July 2011

I want to be my own fund manager!!!

We read lot of stocks ideas on internet support groups, website, thousands of premium membership available for $30 -300 for monthly, yearly membership, multiple TV channels analyst discussing next bright ideas and stocks, mutual funds, option, CEF, multiple hedge techniques etc. Guess what middle class still a lose money in stocks market. Information, lot of information overloading and clouding our judgement of investing. Always burned

Now if you want to get away from this confusion you also have option to hire portfolio advisory services offered by reputed firms but they come with some fee/charges. Even recently I tried few services like betterment.com, marketriders.com for my small investor perspective but still I was not satisfied with extra fees and limitation of investment. I like to be honest I have betterment.com account and I like simplicity of investment choices and transparency of investment but problem is I am still paying ETF fees + .9% flat betterment fees and limited to their ETF of their choices.

I want to invest wisely but cannot afford portfolio advisory services, cannot go for CD, Saving accounts for 1% interest rates but I like to invest like them do not want to worry about markets ups/downs.Now my wishlist is if have $5000 to invest

1: I want to diversify my small money in big investment horizon. Ya you got it right with my 5 grand I want to invest in top 100 companies, gold, International market, Hot corporate Bonds, US Treasuries etc.
2: I want my portfolio outperform index consistently and I can measure it myself in ups and downs.
3:I want pay less fess then mutual fund so my little principal investment amount will not sucked in hefty mutual fund expense ratio and load fees.
4: I want no transaction fees every time I add little investment in my portfolio.

Difficult but Here what I did to fulfill my wishlist and formulate my investment strategy.

First I identified ways to minimize my transaction cost because I will be investing on recurring basis may be on monthly basis. So I chose to open free trading account in TD Ameritrade because they are offering more than 100 ETFs free of transaction fees and most of them are highly rated in Industry. ETF is another choice over mutual funds because of low expense fees then Mutual Funds. So I here resolve 1 issue transaction fees and lower portfolio expenses.
Second Steps identify diversification I need I chose large cap growth, large cap blend, Midcap, International,Conservative bond ETF, Inflation protected bonds, and Gold ETF. So I chose seven ETF to trade and target my portfolio. I also created a watch list on Morningstar.com to create alerts, consistently view their performance and they also have cool feature called instant X- Ray which will explain your diversification and expenses. My portfolio expenses ratio came about .23%. So achieved another step

Third step is allocation of my funds into these ETFs as per my desire % . I created a tool in excel to calculate and divide my investment as per percentage allocated by me in same sheet as per current quote in market. All I have to do place those order manually in TD Ameritrade website and good things is that I place 7 ETF transaction order for $9.99 only. I will be attaching my tool soon to help out people create own investment balancing.

So much in wishlist and you may think not impossible but will agree very difficult for small investors. After being in servicing financial industry as software professional I like put my experience create better investment strategy for myself first and let other know. Please do not confuse my strategy with your because you may have different goals then mine. What you can do you can use these steps to define your strategy i.e. you can define your own strategy with High risk- high reward profile with small money by investing more in stocks part and less in bonds and gold. You can go for less risk and low growth portfolio with more bond exposure.