Creating a Diversified Portfolio

I see advertisements and news articles galore on robo-advisors popping up everywhere I look. Don’t get me wrong, I find these services to be much more cost efficient than the traditional financial advisors. Companies like Edward Jones still charge excessive investment and administrative fees so that they can cover their expensive overhead. Brick and mortar investment advisories have rent, utilities, and employees that they need to pay, and after all of that they still want to turn a decent profit. You, as the investor, are paying for that overhead. We as a society need to understand that creating a diversified portfolio with a risk tolerance comparable to your years until retirement, and that nothing more, or less, is needed.

First and foremost, a general rule of thumb is to limit your bond investing to your age less 10 points. So if you are 30 years of age, you should be 20% invested in bonds. The remainder of your portfolio should fall into equities! Now I am not saying you need to invest 80% into Apple stock, rather, you should diversify amongst a basket of equities.

Low cost mutual and index funds are usually the way to invest. Notice I said “low cost”. Index funds cover a wide variety of industries and stocks, some domestic, some international, and hopefully some that pay a healthy dividend as well. You want a high performing fund that takes as little off the top as possible. I generally try and stay within 0.5% for fund fees. Remember, those advisors charge you a fee on top of fees these individual funds charged, so chances are these are fees that you are already incurring that you may not even be aware of.

If you are looking for other investment options to further diversify your portfolio there are many. Binary options investing can a reliable fixed return investment to add to your burgeoning portfolio. Companies like Banc De Binary have a plethora of online resources for you to review and read up on. Consider that commodities are making a hot comeback as well. I know these types of investments are typically deemed to be stodgy and stale, but gold and silver are limited in quantity, and the limitation of a resource almost always makes it more valuable. We are even seeing silver rising in value at a faster rate than gold for the first time in a long awhile.

Avoid Borrowing Money from Friends and Family

We all get into a bind from time to time, for one reason or another, it happens to the best of us.  How you get through it and come out on the other side not only matters to your financial future, but also the relationships around you.  Whether it is a large sum of money that you could not get a personal loan for, maybe family or friends are offering a lower interest rate (perhaps even no interest) that would save you plenty of money on interest that you could not get otherwise, or need a few dollars short term to get by until the next paycheck, avoid asking family or friends for the money, you will thank yourself in the long run.

When the conversation is initiated it is awkward for both parties.  First the person coming to ask for money has to disclose finances, which whether you are in good or bad financial shape is not smart to discuss with those around you, as it usually can make someone jealous or envious.  Second, the person in the position to lend money may feel obligated to help, so it puts them in a difficult position to say no and feel weird around them going forward, or say yes and begin the process of having this person be indebted to them.

If a sum of money is agreed upon it runs the odds of being open ended, as typically money lent to family and friends tend to have loose terms and have no interest, putting a borrower and lender in a state of where the lender is always nervous wondering when the money will be paid, and the borrower not knowing when to pay it back.  After a period it could come across that the loan is not a priority, making the lender then hove the difficult talk to ask for the money back, and therefore suddenly get-togethers are getting awkward for both parties.  Neither will want to talk about the money that was lent, or anything that costs money for that matter.

When you lend money to family and friends you are sort of enabling them instead of helping them working through their problems, even getting to the point where more money could be asked for.  Not only is the money not collecting interest for the lender, but it also reduces their money if ever needed for emergency.  If you decide that it is ok to lend money, make sure there are terms are agreed upon, but must also be aware that there is a possibility that the money could never be returned, therefore jeopardizing the relationship.




Whether you’re a bullish investor or a bearish investor, stock buybacks are something that you’ve probably been talking about over the last couple of years.

The fact is, buybacks have long been touted by bullish investors as having many excellent benefits, including the fact that shareholders get return capital without being taxed twice, which causes the per share earnings increase and, technically, increases demand for the company’s shares as well.

If you talk to a bearish investor however, they will tell you that buybacks are the reason that earnings have risen during the last few years, and will likely insist that buybacks are just “financial engineering”. Even worse, many bears will tell you that buybacks demonstrate a company’s a lack of strength in their fundamentals.

The truth is that both of these arguments have merit, depending on the specific situation in which they are used.

Take a company that’s in a highly cyclical industry, or one that doesn’t have any barriers to competition, and you’ll find a company that shouldn’t be buying back stocks. The same can be said with a company that has structural issues, or no confidence in being able to sustain a specific level of earnings.

A perfect example would be Weight Watchers International.  The company repurchased 18.3 million shares back in 2012 at $82 dollars per share, totaling $1.5 billion. Recently their stock closed at $8.19 however, and their entire market Is now under $500 million.

On the other side of the coin you have consumer staple companies, utilities and telecom companies, which have proven the stability of their business through several different market environments and built excellent barriers to competition. In this case, any extra cash they have could certainly be returned to shareholders in the form of buybacks.

This of course assumes that they aren’t over-leveraged or don’t have the option of investing that cash in an area with higher returns.

The simple fact is that the more stable an industry is, the more debt they can take on due to their ability to pay interest and principal at maturity, and also because of the confidence that the market has in them.

In short, all buybacks are definitely not alike. Before taking a side whether they are “good” or “bad”, it pays to dig deeper into the specific company and stock that you have in mind.

Most investors looking for and equal-weight exchange traded fund look first at its age but, If you look at the Power Shares Russell 1000 Equal Weight Portfolio (EQAL), you quickly realize that, sometimes, age doesn’t matter.

Tracking the Russell 1000 Equal Weight Index,  EQAL debuted in December 2014. One of its direct competitors in the ETF market is the iShares Russell 1000 ETF (IWB) and, since December, it is handily been winning the competition.

If you look at the year-to-date to comparison it looks like EQAL is only slightly outperformed IWB but, if you go back to their December launch, the gap is much greater, with EQAL having better than a two-to-one margin over its competitors.

One of the main reasons for this is that, rather than merely assigning the same allocation to each holding in their fund without regard to the weight of each sector,  EQAL instead applies an equal weight to 9 sectors as well as an equal weight to each security from those respective sectors.

Another reason that they have outperformed the IWB is that they overweigh energy and healthcare, allocating just 10.2% to both of those sectors respectively instead of the currently allocated 22.5% of the index. They do the same with financial service names, allocating a still commanding 10% of their weight to them in comparison to IWBs 17%.

Rolf Agather, the managing director of global research and innovation at Russell, recently explain the reason that he believes EQAL is performing so well, to whit; “Equal weight indexes are designed to include every sector within an investment universe while potentially lessening the impact of any one sector or company on overall index performance. And Russell’s equal weight approach of equal weighting sectors, and then companies within sectors, is unique,”

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