September 2006 Score Card — Part IV: Asset Allocation

This is the last item on the September 2006 score card: asset allocations of the taxable accounts.

In addition to investing regularly in our retirement accounts (401(k)s, Roth IRAs), I also have some stocks, ETFs, and mutual funds in taxable accounts. Right now, these accounts serve as supplements to our retirement investments. When it comes to withdrawing later on, we will tap the funds in the taxable accounts first and let money stay in tax-sheltered accounts for as long as possible.

Mutual funds: 

A little less than half of the assets in the taxable accounts are invested in various mutual funds directly through mutual fund companies. For mutual funds, I have a target asset allocation of 30% large cap, 25% international, 25% small cap, 15% mid-cap, and 5% bond and cash. However, the asset allocation, which I got from my Quicken, didn't show any mid-cap and large cap is way over target. The main reason was that one of the mutual funds, CGM Focus (CGMFX), was categorized as mid-cap blend before, but the investment style drifted to large-cap growth as its asset grew to more than $2 billion, contributing to the percentage of large-cap in the asset allocation. Also, Columbia Stagetic Investor Z (CSVFX) is characterized as mid-cap by Morningstar, but Quicken seemed ignored it. At the small-cap side, the only fund in my holdings is BUFSX in the small growth category. 

At the end of September, the biggest holding is still Dodge & Cox International Funds (DODFX), which counts for more than 16% of the mutual fund assets. Though I put $100 into this fund every much, I didn't set up any automatic plan like I did for other funds. I am not trying to time the market, but I buy this fund when there is a decline in the foreign markets. I also have about 7% invested in precious metal (TGLDX). For this particular, I also buy when the gold price declines.

Stocks: 

I also have 5 individual stocks and 6 ETFs in the brokerage account at Scottrade and the biggest piece is China Life Insurance (LFC). I bought 1200 shares of this stock when it IPOed in December 2003 with some money I borrowed from 0% balance transfers. Funny thing about this stock was that it pretty much didn't go anyway in the one and half years after the IPO and I as so disappointed I sold 700 shares at the price slightly higher than what I paid for in May last year to pay off some balance transfers I took from my credit cards. However, since July 2005, this stock started to take off and the price went from $25 something to $80 something! You can imagine how happy I could have been if still had 1200 shares. Anyway, I guess one lesson I learned from this stock was that I should never buy stocks with borrowed money.

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