Blog posts on Investing

Posts selected fromManagement Blog - Engineering Blog - Investing Blog and other blogs

• 10 Stocks for 10 Years (2018 version)

  The 10 stocks I selected for this 2nd version are (closing price on 22 April 2005 – % of portofilo invested):

  • Tencent (TCEHY) – $43 and 15% (using the USA ADR). A phenomenal company with incredible global prospects for the long term. As the stock price has been hampered by concerns about China it has great potential for appreciation from the current price.
  • Alibaba (BABA) – $175 and 15% (using USA ADR). Another phenomenal company with incredible global prospects that has performed poorly this year due to China concerns.
  • Alphabet (GOOGL) – $1,254 and 11% (in the original 2005 portfolio the price was $216 and it started at 12% of the portfolio. The prospects are great long term, the stock price reflects that so it isn’t cheap but over the long term I expect it to do very well).
  • Apple (AAPL) – $225 and 11% (I added Apple to the original 10 for 10 portfolio in 2010. The biggest mistake in the original portfolio was leaving off Apple, I considered it but chose not to include it. It has been my largest stock holding for years. It has been very cheap even just a few years ago, though today I think the price is much more reasonable so it isn’t the great bargin it has been. Still the long term prospects are great.)
  • Abbvie (ABBV) – $97 and 10% (I added Abbive to the original portfolio in 2014. I would select a couple other healthcare stocks in a real invested portfolio for balance but Abbvie is the company I am most comfortable with so I include it here.)
  • Toyota (TM) $125 and 9%

  ...

  continue reading: 10 Stocks for 10 Years (2018 version)
• Personal Finance Considerations for Going into Debt for Education

  I think taking on debt for education is a sensible financial decision. But the level of the debt that is sensible must be considered.

  When I went to college (too long ago) it was expensive, but not nearly as expensive as it is now (in the USA at least – I am not as familiar with the costs outside the USA other than knowing in many places that university education costs are very reasonable).

  I don’t have any hard cutoff where I think taking on debt no longer makes sense. But I do think I would include cost as a major factor when deciding what college to attend if I were facing that decision today.

  ...

  As I have said before the reason to chose a career is because that is the work you love, but in choosing between several possible careers it may be sensible to consider the likely economic results. And in choosing how much to spend on your education considering your future earnings is wise.

  continue reading: Personal Finance Considerations for Going into Debt for Education
• Using Annuities as Part of a Retirement Plan

  Annuities have a bad reputation, with a history that makes that bad reputation sensible. The main problem is the high costs (and often hidden costs) of many annuity products. Combine with large sales incentives this has led to annuities being abused by sales people and financial companies while providing poor returns to investors.

  However the attributes of annuities fit a specific part of a retirement plan very well.

  ...

  The best roll for an annuity in retirement planning in my opinion is to serve as a protection against longevity. The longer you live the more risk you have of outliving your investment savings. Life annuities have the benefit of continuing for as long as you live.

  continue reading: Using Annuities as Part of a Retirement Plan
• Real Estate Investing: Amazon’s Regional Office in Arlington, Virginia

  Amazon announced they are opening major new offices in Arlington, Virginia and New York City [Amazon has sinced decided not to go ahead with the NYC plans]. Each site will hold 25,000 new Amazon employees at an average salary above $150,000...

  The direct impact of Amazon’s employees renting and buying in and around Arlington is not going to be very strong for a couple years...  But investors already can plan for a strong future demand from Amazon and all the activity that Amazon’s growing presence will contribute to.

  ...

  Unlike the stock market where such a predicable strong investment future would drive prices up say 30-50% immediately, in real estate it is much more likely for the gains to be spread out over the long term.

  If prices in housing increase in Arlington it is more likely they would increase say 10% in the first year and then an extra 3% (above what the increase would have been without Amazon’s move) each of the next 10 years. From a long term investors perspective this provides a great possibility for buying now (even after the news) and not having to pay a huge premium.

  continue reading: Real Estate Investing: Amazon’s Regional Office in Arlington, Virginia
• An Inverted Yield Curve Predicts Recessions in the USA

  The chart shows the 10 year yield minus the 2 year yield. So when the value falls below 0 that means the 2 year yield is higher. Each time that happened, since 1988, a recession has followed (the grey shaded areas in the chart).

  Do note that there were very small inversions in 1998 and 2006 that did not result in a recession in the near term. Also note that in every case the yield curve was no longer inverted by the time a recession actually started.

  ...

  continue reading: An Inverted Yield Curve Predicts Recessions in the USA
• How to Safely Spend Savings in Retirement

  There are no super simple answers in my opinion. But ideas like 4% (or 3.5% or …) do get you at least in the right ballpark for what has worked historically in the USA with specific portfolios

  ...

  No one blog post is going to provide an answer to the question... There are some very good posts, articles and studies on the topic, here are a few:

  • The Silliness of the Safe Withdrawal Rate Movement – “The correct answer to “what is a safe withdrawal rate?” is “something around 4%, probably in the 3%-6% range.” Not 3.59% or 4.21%.”
  • Bill Bengen: How to Monitor and Adjust Withdrawal Plans

  ...

  continue reading: How to Safely Spend Savings in Retirement
• Focus on Customers and Employees

  I believe it is the purpose of organization to serve many stakeholders(customer, employees, stockholders, community…). Thankfully some companies agree: Compensation at Whole Foods – Starbucks: Respect for Workers... Here is another example – How Costco Became the Anti-Wal-Mart...

  I am happy to invest in companies where all stakeholders are winning – I think that is a great long term strategy...

  continue reading: Focus on Customers and Employees
• Tencent Gaming

  Tencent is one of the stocks in my 10 stocks for 10 years portfolio. In fact it is my largest holding (when you consider that Tencent shares owned by Naspers. Some others have performed better since my reboot of the portfolio in August of 2018: Apple (from 225 to 318) and Danaher (from 103 to 162) and Naspers (33 to 34, which might not seem so great but 2 spinoffs provide another 15) but I still like Tencent a great deal for the next 8 to 10 years.

  Tencent has quite a few huge global businesses. One of the most promising areas is Tencent Gaming. Tencent has ownership in many of the largest computer gaming companies globally...

  continue reading: Tencent Gaming
• Fed Funds Rate Changes Don’t Presage Mortgage Rate Changes

  The recent drastic reductions again emphasize (once again) that changes in the federal funds rate are not correlated with changes in the 30 year fixed mortgage rate. In the last 4 months the discount rate has been reduced nearly 200 basis points, while 30 year fixed mortgage rates have fallen 18 basis points.

  continue reading: Fed Funds Rate Changes Don’t Presage Mortgage Rate Changes
• Saving for Retirement

  Saving for retirement is not complicated, it is just a matter of priorities.

  ...

  Savings for retirement is difficult mainly because of our trouble planning for the long term, it is not at all a complex problem. The fable of the ant and the grasshopper illustrates this point very simply and it is really that simple. ...

  continue reading: Saving for Retirement
• Most Valuable Companies in the USA Compared to the Total Market Capitalization

  In general investing in low cost index funds (like Vanguard’s index funds) is a very sensible strategy. I personally invest mostly in individual stocks. I see stocks such as Microsoft and Costco that are attractive businesses to invest in but the stocks are so costly I hesitate to invest. In addition, I already am over-invested in mega-cap companies (my largest holdings are Apple, Alphabet and Amazon, about 36% of portfolio). So avoiding other mega-caps makes some sense to me.

  ...

  10 year returns: Apple (up 1,068%), Alphabet (up 424%), Amazon (up 693%) and Microsoft (up 1,090%). FYI, the total USA market index fund (VTI) was up 187% for the same 10 year period and the S&P 500 index fund (VTI) was up 204%.

  continue reading: Most Valuable Companies in the USA Compared to the Total Market Capitalization