2011 Investment Strategy

I know we aren’t even decking the halls yet, and I’m thinking about next year?  Yes, like the game of chess you need to think a few moves ahead.  2011 is just around the corner.  Think of me like the retail stores that bring out the Christmas (er I mean Holiday) decor the second it turns November 1st.   Now is the time to start thinking about your investment strategy for next year.  I’ve followed my tax efficient investing strategy for this year, filled up our allocations, and have money left over.  What should I do with the extra money?  Do I put it in some low paying 1 year CD with a rate less than 1.50%?  Do I put the money in a taxable account, and purchase some stock? That’s not a bad idea, and plan on keeping some money for some stock purchases.  I’m not sure which stocks to pick, and I need to spend some time doing more stock market research.

Here’s one recommendation that I’ve not seen mentioned anywhere.  Sit on it. Yes that’s right, do nothing. I’m not suggesting put the savings into a money market account that on average earns a whopping 0.66%.   If you already have followed the strategy for 2010, why not use any money left over and fill the investments for 2011?  I plan on using the money to fill up my 2011 allocation of tax efficient investments.  It’s only a few months away, and my priority is maxing out our tax efficiency for retirement and higher education.  So in my hungover stupor on January 1st 2011, with a few mouse clicks, I’ll transfer monies to meet our 2011 allocations.

2010 has been an interesting mine-field for investing, but we haven’t done bad this year.  In its fits and spurts, overall the stock market has done pretty well.  At the time of writing this post, the S&P 500 has a YTD gain of 11.55%.  If you’ve owned bonds during this past year, you’ve also seen the pricing trend decrease, and therefore increasing your return on existing bonds owned.  If you’ve owned commodities high-five to you.  As I write this, gold is at a record high of $1420/oz with no end in sight. Gold has increased over 28% YTD.  Hard and soft commodities have all done well.

Investment Options for 2011

What are your investment options for 2011?

  • Bonds – No Way!
  • Commodities – Not now
  • Stocks – Maybe

Bonds may get a decent return to an existing investor, though I’m personally not adding any additional monies into bonds.  As PIMCO’s Bill Gross has stated, we are at the end of our 30 year bond bull cycle.  I, too, fear it will end soon.  After all, how much lower can a 10 year Treasury go?  As of today it stands at 2.54% APY.  I think we may hit close to 2.00% with the 10 year in the first or second quarter of 2011, but not much lower.  I’ve stated previously that IBonds were a good investment.  I’m somewhat on the fence about the recently announced 0.00% fixed rate for IBonds and overall earning 0.74% APY.   I will revisit IBonds in May 2011 when they get their semi-annual change.  If I had to choose only against Treasuries, CDs, corporate bonds and US Savings IBonds – I guess the lesser evil would be IBonds.

Stocks Are Cheap?!?

I’m seeing talking heads on CNBC and alike state stocks are cheap. I’m not even sure that’s true. When has a stock analyst ever stated it’s not a good time to invest?  It’s kinda of like asking a waitress if today’s dinner special is any good.  “No sir I had the salmon special today, and it was awful.  It smelled like your gym shorts after working out”.  A stock analyst will always recommend what they sell.  What are they selling? Stock investment advice.  Heaven forbid they recommend you pay down the 16% APY credit card you owe money on.

Yes, it’s true our Federal Reserve has interest rates at 0 – 0.25%, so that makes most fixed income investments stink.  In addition, the QE2 has set sail, which in the long run means more devaluation of our currency.  Investments like stocks, bonds and commodities should already have priced in the $600 Billion purchase of Treasuries by the FED for the next 8 months.  Though stocks typically do better in a low inflation and quantitative easing environment.  The Shiller PE 10 ratio is currently at 22.31.  Not cheap by historical standards, which is an average of 15, but it does not automatically rule out investing in stocks either.  I’m treading very cautiously in this environment and trying to pick my investments carefully.  If I don’t invest in any new stocks next year, I will use some savings to pay down debt; most loans are very low APY% (sub 4% after taxes) and 30 year term.  A guaranteed 4% return may not be so bad in this economic environment.

My Goals and Plans for 2011

  • Follow my tax efficient investments strategy.
  • Invest based upon my asset allocation.
  • Purchase more dividend stocks, but add them in our Roth IRA accounts.  Most likely it will be one or two dividend aristocrats.
  • Create a WTF Fund (more on this in a future post).
  • Consult an attorney to create a will and trust for our family.
  • Decrease my salary through my corporation and pay off remaining debt within my corporation

Read up on my detailed 2011 Financial Goals

Readers: What are your investment goals for 2011?  What do you think will happen with the stock market next year?  Where are you putting your money next year?

Comments

  1. DIY Investor says:

    First off I think you’ve got a good plan. The estate planning is really important especially guardians for kids, advanced medical directives etc.
    I am positive on stocks in 2011 although I expect the chopiness to continue. Hopefully politicians won’t totally screw things up.

    • Investor Junkie says:

      The issue is I’m not finding any stocks that are screaming bargains like we saw in 2008-2009.

      • DIY Investor says:

        You’re not going to find bargains like 2008/2009. After all the market is up by an astonishing amount from then. If we are up in the low double digits in 2011 that’ll be good enough for me. I suggest buying ETFs like DVY etc.

        • Investor Junkie says:

          True. I’m just saying with buying a stock below my 10-20% margin of error. Picking the winners makes it that much harder. ETFs like DVY do make more sense then.

  2. Evan says:

    Man am I envious of how together your stuff is, but come on no wills?!

    Not knowing all the info, I would say cash is king right now.

    • Investor Junkie says:

      Yes I know important to have.

      I think cash is trash also I think it comes down the lesser evil with any of these investments. Out of the entire investment universe, dividend stocks are looking like the best deal to me.

    • Investor Junkie says:

      I think have a specific amount of cash on hand to buy if/when another correction occurs is a great idea. What percentage I’m not too sure.

  3. Mike@atfinancialplan.com says:

    One of my main investment goals for 2011 is make money off of the Fed. Don’t fight the Fed, join him.

    Borrow money at 1+% and invest in A grade preferred stocks @ 6-7%. Interactive brokers will let you leverage @ 10X. This is a recipe for making easy money.

  4. Nicholas Cristella says:

    Never place your account in a CD unless your money is simply a holding to make future moves into the market. My suggestion is find a personal broker. With the right broker returns of over 600% or more in a year are not uncommon and 200% is likely.

    • Investor Junkie says:

      “With the right broker returns of over 600% or more in a year are not uncommon and 200% is likely.”

      Yea OK sure whatever you say.

    • Evan says:

      200 to 600%? Thats like me giving a broker $100 bucks today and him handing me $20K next November?

      I’ll risk the ponzi scheme give me that broker’s #!

  5. Barbara Chavez says:

    First off I think you’ve got a good plan. The estate planning is really important especially guardians for kids, advanced medical directives etc. I am positive on stocks in 2011 although I expect the chopiness to continue. Hopefully politicians won’t totally screw things up.

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