According to David Darst writing in The Little Book that Still Saves Your Assets, John Wiley & Sons Inc., 2013, 90% of the difference in returns for large US pension funds over the years is related to their asset allocation. What is the meaning of that sentence? Asset allocation has three main criteria: make money, not lose money, and re balance the asset mix.

Mr. Darst for the most part deals with very wealthy people, trusts and pension plans as the size of the portfolio grows, it is important to be diversified. The idea is  when something negative happens that affects your biggest holdings, you do not have to sell the good parts to meet the goals you have set for yourself. In the book, Mr. Darst provides examples including linking the method you decorated your home to investment styles. As Mr. Darst works in the securities industry, how to pick an investment advisor is covered as well. There is a parable in the bible about building a house on sand and one on rock. For a while nothing is different, then a storm comes and the house on the sand is destroyed, the house on the rock while damaged remains standing. Start with strong foundation. Mr. Darst concludes with a number of questions to ask about investment outlook and selection and websites to go for more information. It is a helpful book which could save you money, by not losing it.

Linking to dividend producing stocks, within your portfolio given the rates of return relative to the risk for this group it is good to have a large segment in dividend paying stocks. When the author first started buying these stocks, the investment community put them under the income category, later it was switched to growth category. Dividend producing stocks are a hybrid, but the idea is buy them for the dividend (income) and as dividends continued to be paid, the stock will go upwards. In the low interest environment which we are in, dividend stocks have performed very well. Until treasury rates reach 7%, (good yield with very little risk) it is a great idea to own dividend shares.

There are more questions than answers, till the next time – to raising questions.

According to David Darst writing in The Little Book that Still Saves Your Assets, John Wiley & Sons Inc., 2013, 90% of the difference in returns for large US pension funds over the years is related to their asset allocation. What is the meaning of that sentence? Asset allocation has three main criteria: make money, not lose money, and re balance the asset mix. Although making money seems easiest, having a goal of why you want to make money will help simplify your world. Having established the why, to make money over the long term is not to lose it. If you invested and make 40% one year, lose 30% the following year, after 2 years and assuming a great deal of risk you have made 10% or 5% a year. For those returns, there are many less risky investments. The third part of the criteria was to re balance your asset mix. Not every asset class or sector does well every year. As your assets increase, it is important to ask, if something negative affects the markets, which of your assets will be affected most and which assets should be the least affected. Often times we own shares in companies we know and linked to our geographic area. Sometimes that is very good, sometimes not so good. Re balancing means that your are aware that most companies go through cycles, as the cycle moves down lessen your holdings and buy something that should be in the growth phase of its cycle. You do not have to sell everything, but be conscious of possible effects.

Linking to dividend paying stocks, while this blog believes you will lose less money with dividend paying stocks, and given the two returns of a dividend and stock appreciation over time making money should be easier. The re balancing is important as your portfolio gets larger and larger. If you look at the Dow Jones from 50 years ago to the companies in it now, some have changed. In terms of dividend producing stocks the signal to begin considering change is when a company thinks of lowering its dividend to save money or to pay other bills.

There are more questions than answers, till the next time – to raising questions

The other day on the way home from work, the sun was shining and the author stopped at a park. Among the activities in the park were two young people practicing skateboarding tricks. The two were dressed in the correct clothes and were doing the lingo of the skateboarding crowd, but they still needed lots of practice to do the kind of tricks they seemingly wanted to do. If you were to ask me, what kind of board they should be using? who are the major players in the skateboarding industry? my answer is do not know, and for the most part not interested. If another family member starts skateboarding, then my interest would be sparked. Similarly in the past, a nephew did not read very much but he did read skateboarding magazines. It was at that time he received a subscription to one of the magazines, he has since gone to post secondary education.

Linking to dividend paying stocks, similar to the young people practicing in front of the audience of the park, you will need practice. It is easiest, if you keep working on the basics before trying new dynamic tricks. For the author, the basics include for dividend stocks whether the dividend will be paid and possibly increased? how long has the dividend being paid? Those two questions lead to others but if the dividend is being paid, then the stock can stay on the keeper list. If the dividend is being lowered it is a big sign to sell. If the dividend is rising, then it is sign to worry about other things.

There are more questions than answers, till the next time – to raising questions

We all make money and then do something with it, after paying the bills many people collect things. The collections begin small and as collections do, they evolve as you spend more time and gain knowledge about the collection. At just about every garage sale, which begin as the weather continues to improve, books are available. Once in a while, there is great finds of books that are more valuable than what the price is offered at. An interesting book was written by Allison Hoover Bartlett called The Man Who Loved Books Too Much, Penguin, 2009. The author looks in the world of rare books in terms of the people in the industry and someone who fell in love with books, but does not have the money to buy them so he found a way to steal them. The thief wanted it all right now, while most of the dealers built up their knowledge and collections through the years. The book wonders what drives a person to collect whatever they collect?

Linking to dividend paying stocks, there is a host of investments to be made or asset allocation, if you were starting with hundreds of thousands of dollars. If you are starting with less, as you look at all the stocks in the marketplace, a great place to build a solid foundation is dividend paying stocks. They have the advantage of profitable companies, being in business of years, paying the shareholders money every year, and having a  track record in both up and down markets. As you invest, you become more knowledgeable about what you want, what you do not want and how much to pay for it.

There are more questions than answers, till the next time – to raising questions

In the spring of the year, people think about home repair, because the weather is nicer and home repairs take time. Just about everyone can pick up a hammer, but just because you can pick up a hammer, does not make you a contractor. In my case, the one with knowledge and skills was my Dad, my skills are of a supporting nature. Watching the home repair TV channel, there was an example of a person seeing a wonderful ad, then spending thousands of dollars before realizing they were ripped off, and the TV contractor comes in and fixes everything. This was not an isolated example, many people do not do their homework first. If you were to invest in the market, you would look at a variety of companies and make a choice. In the TV case, the couple looked at only one company,considered the end result and made a decision. One thing the couple could have done is priced the products in the ad, was it believable? There maybe instances where it could have worked, but in this example it did not.

Linking to dividend paying stocks, one of the reasons why this blog likes this type of stock is in order to pay a dividend, the company will have existing products and services which are being sold and the company is making money from them. If you start with a profitable company, you limit the downside risk. With the attraction of paying a dividend, money will come back to you, whether you reinvest or whether you take the money in your account, the dividend also helps to limit your risk. A large part of investing is not losing your money, but actually making money. Dividend stocks help you do that.

There are more questions than answers, till the next time – to raising questions

At this time of the year the Kentucky Derby is run. There have been many articles and books written; videos of the stories of the horses, jockeys, trainers or owners can easily be found. The Derby is the first leg of the Triple Crown and whatever horse wins has the ability to win all three races or the Triple Crown. Each race tests a different attribute of the horse and jockey, which makes winning all three a rare happening. The Kentucky Derby brings in the general public to the event and generally the public gives the event its goodwill. In the pictures seen from the past, people make the Derby an date on the social calendar. For the rest of the racing season, the crowd is back to normal.

Linking to dividend paying stocks, while the Kentucky Derby is a very important race, there will be 12 races held that day and during racing season, horse races will happen 4 days a week. Every company has a particularly important day or week to celebrate that industry. While the event is very important, what happens in the other races is even more important to the dividends to be earned. The Derby is a premier event, but will does not make a season, enjoy the run for the roses.

There are more questions than answers, till the next time – to raising questions

In the area in which the author resides in, there are four seasons with the need to wear heavy jackets for much of one season. As much as the desire to embrace the winter, it is much easier to live in the other seasons. Fortunately the area is enjoying summer like weather and that means the windows are open. The fresh air circulates throughout the house and in the morning the birds chirp in the trees. The birds have returned from their winter in the south and some of them live in the trees in the area. Many of the trees were planted about 100 years ago which is good for their summer shade, but on the days of wind storms, branches are likely to fall. My understanding is the birds tend to stay in the same neighbourhood even though they migrate south for the winter.

Linking to dividend stocks, the birds that are chirping are likely from the same families that was there last spring. They are consistent, dependable, and do what birds tend to do. Ideally those are similar patterns you want in the stock. The company consistently makes money, the dividends are paid every year and hopefully increased, and the company continues to do what is good for their customers. Hopefully whatever type of bird you have in your area, the chirping is considered a welcomed tune.

There are more questions than answers, till the next time – to raising questions

Invariably many people eat meals away from their home, some for special occasions, some because it convenient, some because it is easy and a host of other reasons. While eating out and enjoying the meal is a great thing to do, the investing part of the restaurant may not be. Since we all eat and many learn to cook at home, often times people believe they can run a restaurant, which could be partially true. The daily operations of running a restaurant, plus the need for a loyal following or many guests to come into your restaurant are factors which cause a high turnover of restaurants. One theory is the hardest part of a restaurant is defining what the restaurant is and essentially it has to stay that way. For example if a restaurant starts with the best spinach based meals in town, and the chef wants to try something else, it is likely customers will vote with their feet and try something else for in the restaurant trade there is lots of choice. If they go will they come back?  If the restaurant is no longer hot, then what?

Linking to dividend paying stocks, while there are some dividend paying companies in the restaurant trade, the restaurant trade remains a very tough business to make consistent money. Unless you have a particular attachment, you may wish to look at seemingly easier industry subgroups. Most companies change a little over time, as they add new services to meet the demands of its customers. Some add these new services well and others never quite make the changes work, because their customers really do not want or see the need of the services.

There are more questions than answers, till the next time – to raising questions

On a recent visit to a family member, it was noticed there was a little sticker in their windshield as a reminder to come in for a tune up upon reaching the required mileage. A tune up on a regular basis is a good thing to do for all vehicles in order to achieve the needed efficiencies. It is also good for the car company to encourage their customers to come back for service (helps pay the bills) as well, when it is time for a new vehicle the customer should be more willing to buy from the service provider. An added attraction is new vehicles come loaded with features which are great for driving, the servicing of these vehicles may be better at the dealer. The sticker represents regular on going income for the dealer.

Linking to dividend producing stocks, similar to the regular income the dealer receives you can receive regular dividend income from stocks. If you buy stocks for their dividend, the money comes regularly. If it does not, you know it is time to move on. While capital appreciation or the increase in stock price happens over the long term, the short term is to ensure the bulk of your investments has a continuing cash flow.

There are more questions than answers, till the next time – to raising questions