I prefer my portfolio to be self-directed.  Paying a financial planner 2% to 3% for something I can do just as well is a waste of money.  A 401k account has a limited number of funds in a plan but there are many more choices with an IRA at a bank or brokerage.  If I have an IRA account I will invest my money in a group of funds through E*Trade, Scottrade or TD Ameritrade following my own strategy defined in the next chapter.  At least with these discount brokers you do not have to pay an extra 2% to 3% investment broker/banker fee.  You will still pay the mutual fund fees which are interwoven within the funds themselves but you will not pay extra for the “expertise” of a financial planner.

Investment Strategy

Here is the summary of my investment strategy:

–         I try to maximize my contribution to my 401k account, which in 2016 is $18,000.  I am dollar-cost-averaging into the stock market with my periodic contributions from my monthly annuity payments. Tip: If you have an annuity you want to sell, reach out to Washington Accord.

–         I have my money in mutual funds not individual stocks. I have a moderately aggressive risk tolerance which means if I lost 10% to 60% of my money, I will not panic and withdraw the depreciated balance.  I will ride the tide and wait it out until the stock market recovers which it inevitably does.  I am more than 10 years away from retirement so my asset allocation, which I think is a balanced portfolio and diversified enough is 1/8 of my balance into each of these categories of mutual funds:  1) Large-Cap Growth, 2) Large-Cap Value, 3) Mid-Cap Growth, 4) Mid-Cap Value, 5) Small-Cap Growth, 6) Small-Cap Value, 7) Balanced and 8) Bonds (Government or AA and AAA only). I selected each category from the following family of funds: Vanguard, T. Rowe Price, Fidelity, Transamerica, John Hancock, Janus, Oppenheimer, Hartford, Invesco, Dreyfus, BlackRock, Janus, Franklin Templeton, Eaton Vance and American Century. The following website is a good place to start to find out the best long-term performers in some of the most popular mutual fund categories:

Example of Allocation

$500,000 Portfolio, $62,500 in each of these funds:

Large Growth

Vanguard PRIMECAP Fund Adm (VPMAX)

Large Value

American Funds Mutual Fund R6 (RMFGX)

Mid-Cap Growth

Janus Enterprise N (JDMNX)

Mid-Cap Value

American Century NT MdCap Val Instl (ACLMX)

Small Cap Growth

Janus Triton Fund D (JANIX)

Small Cap Value

Vanguard Small-Cap Value Index Fd (VISVX)

Balanced Fund

American Funds American Balanced Fund A (ABALX)

Bond Fund

Vanguard LT Govt Bond Index Inst (VLGIX)

Please keep in mind that the above allocation is only an example.  The funds shown above are not specifically recommended.  Moreover, the current funds’ performance may be drastically different from their performance on the date of publication of this book.  Do your due diligence before acting on any information obtained from this book.

–         I automatically rebalance my portfolio at the end of each quarter.