Comments on: Making the Case of Having Alternative Investments in Portfolio http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/ Fri, 20 Nov 2009 19:09:54 -0800 http://wordpress.org/?v=2.8.6 hourly 1 By: kitty http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-46985 kitty Mon, 17 Nov 2008 17:32:44 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46985 I did put a little of my 401K into a commodity fund recently. Also a little in investment grade bond fund since bonds appear to be a good deal now with the credit crisis driving yields up and values low. I also bought 10K worth of municipal bonds (not funds, actual bonds- 5K of AA NYC bond with tax free yield to maturity of 5.3% and 5K of AAA NYC tax receivable bond with yield-to-maturity of 5.36%). The reason I got a better deal on a AAA bond is that I bought it a couple of weeks earlier when the credit crisis was worse. I plan to buy more bonds this week - undecided about municipal or corporate - when one of my CDs matures. A word of caution about bond funds. Don't confuse them with individual bonds. Individual bonds are fixed income investments: they come with a fixed coupon rate and a "promise" to return to you your principal at maturity. While the value of individual bonds on the secondary market goes up and down (except for government I and EE bonds, but these are a different story), you always have an option of waiting till maturity when you'll get your money back unless bond issuers defaults. Bond funds, on the other hand, are NOT fixed income investments. Bond funds include many bonds, each with different maturity date. When you get your money back from the bond fund you essentially sell your bonds at whatever the current market price is on the secondary market. So you may lose money not only when there are defaults, but also when all bond values are down. Bonds tend to lose value a lot when the interest rates go up. While bond funds may offset this with the ability to invest in new bonds that offer higher returns as older bonds mature, it may take longer to recoup the money. Some people mistakenly think that the case of individual bonds vs bond funds is the same as individual stocks vs mutual funds. In fact, the bonds case is a bit more complex. In some respect bond funds may be riskier than individual bonds, especially if you keep to high quality bonds. There are pros and cons in both bond funds and individual bonds, but former being less riskier than the latter is not one of them. I did put a little of my 401K into a commodity fund recently. Also a little in investment grade bond fund since bonds appear to be a good deal now with the credit crisis driving yields up and values low. I also bought 10K worth of municipal bonds (not funds, actual bonds- 5K of AA NYC bond with tax free yield to maturity of 5.3% and 5K of AAA NYC tax receivable bond with yield-to-maturity of 5.36%). The reason I got a better deal on a AAA bond is that I bought it a couple of weeks earlier when the credit crisis was worse. I plan to buy more bonds this week – undecided about municipal or corporate – when one of my CDs matures.

A word of caution about bond funds. Don’t confuse them with individual bonds. Individual bonds are fixed income investments: they come with a fixed coupon rate and a “promise” to return to you your principal at maturity. While the value of individual bonds on the secondary market goes up and down (except for government I and EE bonds, but these are a different story), you always have an option of waiting till maturity when you’ll get your money back unless bond issuers defaults. Bond funds, on the other hand, are NOT fixed income investments. Bond funds include many bonds, each with different maturity date. When you get your money back from the bond fund you essentially sell your bonds at whatever the current market price is on the secondary market. So you may lose money not only when there are defaults, but also when all bond values are down. Bonds tend to lose value a lot when the interest rates go up. While bond funds may offset this with the ability to invest in new bonds that offer higher returns as older bonds mature, it may take longer to recoup the money.

Some people mistakenly think that the case of individual bonds vs bond funds is the same as individual stocks vs mutual funds. In fact, the bonds case is a bit more complex. In some respect bond funds may be riskier than individual bonds, especially if you keep to high quality bonds. There are pros and cons in both bond funds and individual bonds, but former being less riskier than the latter is not one of them.

]]> By: Moneymonk http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-46634 Moneymonk Wed, 12 Nov 2008 23:25:18 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46634 Some of those funds are reopening to new investors http://www.moneymonk.net/2008/11/vanguard-oakmark-reopen-attractive.html Some of those funds are reopening to new investors

http://www.moneymonk.net/2008/11/vanguard-oakmark-reopen-attractive.html

]]> By: Finance http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-46495 Finance Mon, 10 Nov 2008 11:56:56 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46495 Yes, invest in a portfolio of financial securities can diversify or reduce the overall risks, one can consider investing in different types of products like bonds, etc. Yes, invest in a portfolio of financial securities can diversify or reduce the overall risks, one can consider investing in different types of products like bonds, etc.

]]> By: Tim http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-46361 Tim Fri, 07 Nov 2008 23:36:11 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46361 I guess the question is what is the difference between buying an array of sector funds versus a balanced fund? precious metals are problematic to me, because they have been flat forever except the unjustified spike within the past 1.5 years. I guess the question is what is the difference between buying an array of sector funds versus a balanced fund? precious metals are problematic to me, because they have been flat forever except the unjustified spike within the past 1.5 years.

]]> By: Donny Gamble http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-46310 Donny Gamble Thu, 06 Nov 2008 19:08:23 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46310 A great idea that more and more people need to start thinking about having is a self directed IRA. This let's you diversify your investment portfolio into one single location. A great idea that more and more people need to start thinking about having is a self directed IRA. This let’s you diversify your investment portfolio into one single location.

]]> By: 70 Tidbits and Tips on Personal Finance » http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-39700 70 Tidbits and Tips on Personal Finance » Tue, 12 Feb 2008 04:59:04 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-39700 [...] Making the Case of Having Alternative Investments in Portfolio from The Sun’s Financial Diary. Sun’s first post: 6/09/2006. [...] [...] Making the Case of Having Alternative Investments in Portfolio from The Sun’s Financial Diary. Sun’s first post: 6/09/2006. [...]

]]> By: sucellus http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-23426 sucellus Fri, 21 Sep 2007 17:52:48 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-23426 Great information! I'm interested in doing a similar analysis with other funds and allocation plans. How did you go about making these calculations? Great information!

I’m interested in doing a similar analysis with other funds and allocation plans. How did you go about making these calculations?

]]> By: Blue Collar Assets » Blog Archive » Independence Week Roundup! http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-14054 Blue Collar Assets » Blog Archive » Independence Week Roundup! Mon, 16 Jul 2007 18:08:39 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-14054 [...] Sun makes the case for putting alternative investments in your portfolio. [...] [...] Sun makes the case for putting alternative investments in your portfolio. [...]

]]> By: 70 Tidbits and Tips on Personal Finance - The 109th Carnival of Personal Finance - “First Post” Edition » http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-14037 70 Tidbits and Tips on Personal Finance - The 109th Carnival of Personal Finance - “First Post” Edition » Mon, 16 Jul 2007 14:51:53 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-14037 [...] Making the Case of Having Alternative Investments in Portfolio from The Sun’s Financial Diary. Sun’s first post: 6/09/2006. [...] [...] Making the Case of Having Alternative Investments in Portfolio from The Sun’s Financial Diary. Sun’s first post: 6/09/2006. [...]

]]> By: The Sunday Review #28 - Car Troubles Edition http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-13437 The Sunday Review #28 - Car Troubles Edition Mon, 09 Jul 2007 09:21:40 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-13437 [...] Making the Case of Having Alternative Investments in Portfolio by Sun @ The Sun’s Financial Diary. [...] [...] Making the Case of Having Alternative Investments in Portfolio by Sun @ The Sun’s Financial Diary. [...]

]]> By: The Sunday Review #28 - Car Troubles Edition http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-13438 The Sunday Review #28 - Car Troubles Edition Mon, 09 Jul 2007 09:21:40 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-13438 [...] Making the Case of Having Alternative Investments in Portfolio by Sun @ The Sun’s Financial Diary. [...] [...] Making the Case of Having Alternative Investments in Portfolio by Sun @ The Sun’s Financial Diary. [...]

]]> By: We Share in Life - Interesting Stories All Around Us | Personal Finance Blog by Money Ning http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-13361 We Share in Life - Interesting Stories All Around Us | Personal Finance Blog by Money Ning Sun, 08 Jul 2007 04:09:07 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-13361 [...] the number crunchers amongst us, check out The Sun’s Financial Diary with this article where he takes a look at what the performance would be, with and without alternative investments, [...] [...] the number crunchers amongst us, check out The Sun’s Financial Diary with this article where he takes a look at what the performance would be, with and without alternative investments, [...]

]]> By: Friday Finance Findings for July 6th : Generation X Finance http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-13338 Friday Finance Findings for July 6th : Generation X Finance Sat, 07 Jul 2007 21:55:14 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-13338 [...] Making the Case for Alternative Investments - Sure, you can’t argue the fact that putting together a basic portfolio with an index fund or two will provide solid long-term results, but the investment world is so large you are doing a disservice to portfolio if you don’t venture into some further reaching investments. The Sun highlights how just adding a few small alternative investments can have a large impact on overall returns. [...] [...] Making the Case for Alternative Investments – Sure, you can’t argue the fact that putting together a basic portfolio with an index fund or two will provide solid long-term results, but the investment world is so large you are doing a disservice to portfolio if you don’t venture into some further reaching investments. The Sun highlights how just adding a few small alternative investments can have a large impact on overall returns. [...]

]]> By: » Independence Week Roundup! on Blueprint for Financial Prosperity http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-13313 » Independence Week Roundup! on Blueprint for Financial Prosperity Sat, 07 Jul 2007 16:16:54 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-13313 [...] Sun makes the case for putting alternative investments in your portfolio. [...] [...] Sun makes the case for putting alternative investments in your portfolio. [...]

]]> By: Roundup for week of 1 July 2007: The Wiseguy Edition at Mighty Bargain Hunter http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-13212 Roundup for week of 1 July 2007: The Wiseguy Edition at Mighty Bargain Hunter Sat, 07 Jul 2007 06:15:17 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-13212 [...] Sun’s Financial Diary makes the case for alternative investments in a portfolio.  (This is good advice.  I’m long on Forever Stamps myself.  I’m also [...] [...] Sun’s Financial Diary makes the case for alternative investments in a portfolio.  (This is good advice.  I’m long on Forever Stamps myself.  I’m also [...]

]]> By: Sun http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-12929 Sun Wed, 04 Jul 2007 04:50:13 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-12929 Vijay: Actually, I don't have any risk/return data as I feel the raw data isn't available for retail investors (unless through some kind of subscription services) and that's the reason I usually funds whose historical price data are available to public. The only risk/return data I can find is on Marningstar's website (for each fund). However, if you have the raw data of a fund and the data of the index that the fund is tracking, calculating the fund's standard deviation can give you a sense of the fund's risk. Vijay: Actually, I don’t have any risk/return data as I feel the raw data isn’t available for retail investors (unless through some kind of subscription services) and that’s the reason I usually funds whose historical price data are available to public. The only risk/return data I can find is on Marningstar’s website (for each fund). However, if you have the raw data of a fund and the data of the index that the fund is tracking, calculating the fund’s standard deviation can give you a sense of the fund’s risk.

]]> By: Sun http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-12927 Sun Wed, 04 Jul 2007 04:41:14 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-12927 Kujimon: In fact, GSCI index was used in the Financial Planning paper as the benchmark for the study. The index itself has quite broad coverage of commodities, but I feel the portion that's invested in precious medal is a little small (less than 3%). A larger investment in precious medal could produce better return. Yes, the dividend reinvestment is really amazing, especially for the case of the bond fund. Without the reinvestment, the fund's return is much lower. Kujimon: In fact, GSCI index was used in the Financial Planning paper as the benchmark for the study. The index itself has quite broad coverage of commodities, but I feel the portion that’s invested in precious medal is a little small (less than 3%). A larger investment in precious medal could produce better return.

Yes, the dividend reinvestment is really amazing, especially for the case of the bond fund. Without the reinvestment, the fund’s return is much lower.

]]> By: vijay http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-12926 vijay Wed, 04 Jul 2007 04:34:59 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-12926 how do u calculate the effecient allocation of alternative assets in case the risk & return data is not available . this may be due to past price series not being available for such an alternative asset class e.g. private equity how do u calculate the effecient allocation of alternative assets in case the risk & return data is not available . this may be due to past price series not being available for such an alternative asset class e.g. private equity

]]> By: Kujimon http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-12923 Kujimon Wed, 04 Jul 2007 03:49:12 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-12923 Great article. I've just recently started adding commodities and REIT to balance my portfolio as well. For commodities I'm using ishare's ISG ETF. It's based on the S&P GSCI index which track commodities. Seems pretty diverse as it includes Energy, metals, Agriculture & Livestock. I'm amazed at what effect the reinvested dividends had! Great article. I’ve just recently started adding commodities and REIT to balance my portfolio as well. For commodities I’m using ishare’s ISG ETF. It’s based on the S&P GSCI index which track commodities. Seems pretty diverse as it includes Energy, metals, Agriculture & Livestock.

I’m amazed at what effect the reinvested dividends had!

]]> By: IPO - Initial Public Offering Blog » Blog Archive » Making the Case of Having Alternative Investments in Portfolio http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/comment-page-1/#comment-12861 IPO - Initial Public Offering Blog » Blog Archive » Making the Case of Having Alternative Investments in Portfolio Tue, 03 Jul 2007 18:25:48 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-12861 [...] Inspired by the article, I decided to take a look at what the performance would be, with and without alternative investments, using Vanguard funds for different asset allocations. The article, Quasi-Commodities, by Carig Israelsen, …Read full story… [...] [...] Inspired by the article, I decided to take a look at what the performance would be, with and without alternative investments, using Vanguard funds for different asset allocations. The article, Quasi-Commodities, by Carig Israelsen, …Read full story… [...]

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