Investment Readings: My Experience

I had not invested single dime till last year other than blind investments in 401(K) and had no idea about how the investment world works, hell, I did not even know anything about trading, or broker. This year one of the big objective was to get financial planning together and put a structured plan together.

Started with multiple interviews with many of the brokers, being in SF-City, in financial district, I realized that I have access to everybody. Made a list of all the assets I had in multiple 401(K) accounts and realized that the amount is large enough to make everybody interested.

Interviewed personal investment advisors at Schwab, TD Waterhouse,, E-Trade and Fidelity and TechCu Investment advisor. The worst (Very aggressive and non-trustworthy) people were from TD Waterhouse. Everybody was interested in moving my 401(K) to IRA or aske me to move my cash into commercial paper or some exotic instruments. The advisors are willing to explain the basics (although tainted in favor of whatever they are trying to sell you) and are willing to spend time with you if they think you are on a -hook.

One of the advisors at Tech-CU was very keen on selling me Variable Annuity. Accidently reached to SEC website cautioning against investing in Variable Annuity and SEC saved me from a wrong decision. But then realized that I really need to know more before I finalize one over the others.

The best readings are

Mutual Funds for Dummies - Eric Tyson - I always knew that dummies series is good, but never thought that it will be this good. This the best book I read on mutual funds and basics of financial planning. He explains the mechanics and one of the most unbiased book I have read till now. The book is very easy to read and has solid advice including sample portfolio and a good summaries. I still refer to this book whenver in doubt.

Random Walk Down WallStreet - Burton G Malkiel, a Princenton Economist - The best investment advise book one can read on the topic of index funds and long term investing. This is a book for engineers written by another engineer. The book is easy to read and this book has best history of speculative investments than anybody else. A must read for anybody who wants to invest for long term.

Mutual Fund Investing Series by MorningStar - A set of 3 work-books on basics of mutual funds, technical details (Alpha, Beta, Benchmark Index, 5-Star Measurement), how to buy mutual funds, what not to do, portfolio basics, portfolio tune-up and many more topics. The work-books have short lessons, problems and exercises at the end to ensure that you got the material. This is authorative work on mutual funds from an unbiased source. The exercises makes you think and ensure that you got the material.

Morningstar.com - The best investment I have made in online service. This site has best coverage of learning topics. One has to register (free) to get points against free morningstar merchandising. The mutual fund reports (Free and Premium) are the the industry standard and best online learning details.

I did get books from John Bogle, Vanguard, the books are very good read, but after reading Random Walk, those books are easy and repetative and kind of selling Vanguard.

I still had many questions on portfolio planning and how should a portfolio be, there are many tools available, but the most powerful and useful were found at Fidelity.com. These tools help you analyze and study performance of different portfolio mix. Later-on I found similar tool at Morningstar for premium members.

Also, if you fill in most of questionaire on HNI (High Networth Individual) website sections at Fidelity or at Vanguard, they will send you a very detailed analysis of your investment and advise on where should you invest. It is high quality, sound advise one can get free.
The most helpful people were from E-Trade, Fidelity so eventually ended up moving all investment into Fidelity, did direct investments at E-Trade & Vanguard, closed everything else.

Most of the investment advisors will charge you 1% to 1.5% of assets every year and will trade your portfolio based on certain criterions. I then realized that instead of paying that much amount, if I can find a way to invest that money in my learning, I am better of in long-term than depending on some kid out of college managing my money.

I did decide on diversity across asset classes, stocks, bonds, cash, precious metals, REIT's, Real Estate. I also decided to diversify across different geographices with focus on US, I invested across multiple countries by buying mutual funds focused on Worldmarkts and MSCI EAFE Index.

I would say that the amount of information available on investing so much that it is very difficult to separate milk from water. I found that focusing on single source , Morningstar is the best. Morningstar is not only independent but are not afraid to raise voice when something is wrong.

I also put a Individual Investment Personal Statement together. A written statement clearly identifying your investment policy, your entry and exit criterions. I will post a sanitized version of the IPS soon.

Overall it has been a good year, I had 17% returns on a diversified portfolio with worst -12% to best 23% (CTSH) and REIT Mutual Fund (20%). The diversification really works.

Next year, focus on ETF - Diversify into Korea, India, Eastern Europe using this new hot financial instrument (Exchange Traded Funds). Let us see if it helps me to go up or puts me in dump.