December 31, 2010

A guest article

I got an e-mail the other day suggesting I publish a guest article. It was somewhat related to what Ray Lucia was talking about (see my Decemeber 22, 2010 post). Here it is.

How to manage your 401 k account to stay out of debt

The 401 k investment is the most common financial instrument for the US consumers to save for retirement. It is a type of tax-deferred investment that is offered to employees by their employers. If you’re working with an organization where your employer provides you with a retirement account, you must utilize it by contributing a part of your monthly income to it. If you’re not doing it, you’re perhaps making the biggest financial blunder. In future, if you incur credit cad debts, you can easily seek the help of your 401 k account instead of getting help from debt consolidation non profit companies. An employer may match an amount with your contribution to some extent. The entire investment to the 401 k account is tax deferred. Therefore, it is very important for you to take advantage of this tax deferred retirement benefits in order to stay out of debt. Have a look at the ways in which you can manage your 401k accounts.
  • Sign up for 401 k account: As you join a company where you’ll get a retirement savings benefit, you must first sign up with that company. If you don’t sign up with your company’s benefits, you’ll perhaps lose the free money that you are supposed to get from the company as a matching aid.
  • Contribute money to the fund: Once you sign up with the company’s retirement benefit plan, make sure that you contribute as much as you can so that your employer can easily match some more money. Up to 15% of your gross monthly salary can be contributed to this account and can be taken advantage of due to the tax benefits.
  • Know how to access your account: Only creating an account will not do, you also need to access it. The money that you invest in the 401 k account will not be registered by your employer. An independent financial institution will supervise this account. Therefore, you need to know how you can access the details of that account, whether personally or online.
  • Build your investment portfolio: Usually the investor of the 401 k account will offer you various mutual funds for investing your money. Make a comprehensive research of these funds and make sure you cleverly pick the funds that have a higher amount of return than the others. Also check the track records of the funds that you’re investing in. Try to keep both equity funds and bonds in your portfolio. As the investment in the 401 k is not subject to tax, this is a good place to invest in the high-yield bonds.
  • Keep monitoring your investment account: If you have invested earlier, you must be aware that asset allocation is equally important to manage and build your portfolio. With time, readjust your portfolio in order to get better results.
Therefore, if you want to lead a debt free retired life, make sure you invest in the 401 k account that is bestowed to you by your employer. It is certainly better to seek help of your 401 k accounts than debt consolidation non profit companies during the time of an emergency.

December 22, 2010

Should we borrow from 401K?

Thought I do not share Ray's view on trading and investing in stocks, I am a big fan of him and respect him much for his work. Here is his recent radio show radio show (12.21.2010) where he talks about why borrowing from 401K can make sense for some people. Skip first 2 minutes and 25 seconds of a commercial and enjoy Ray.

December 12, 2010

VTINX is still a hold

I saw few visitors came to the blog via a google or yahoo search on VTINX.

I like Vanguard funds and this one in particular, but rising risk of a pullback in stocks combined with rising rates and hence falling bond prices should make investors watch closely and be prepared to reduce their position in the fund.

It usually invests about 65% in bonds, 30% in stocks, and 5% in money market. Our model seems to do its job just fine and says VTINX is still a hold as of now. Next reversal is 11.22.

Below is a chart (click to enlarge)

December 11, 2010

The table has been updated. Stocks continue up and bonds down.

Being hesitant executing a signal from any trading system is quite natural. One of the reasons is that no system is right 100% of the time and many wrong 50% of the time. Following our system and selling stocks in May looked good back then, but people who just held to their stock funds did better this time.

If that feels discouraging, look back a little further and see that those who did not sell in 2008 are still at a loss.

Not trying to outguess a system and following all signals takes discipline.