A follow up to my post –  Commodities

So this is a requested post I received via email. The original post is here where I talked about commodities etc. As with any finance advice I give on this blog these are my opinions, I am not a financial advisor. The person emailing me acknowledged this and the spirit of the email was more along the lines of “Well what are you doing then?” for a portfolio.

I told the person I would use my email reply and post it here as well so others can see. I am not going to list the specific funds I use, again this isn’t a financial advisors blog. I am a finance professional yes but I am not a certified financial planner so keep that in mind.

First, I am 52 years old. I have been investing since 1992. The majority of my assets reside in my 401K that I have rolled over from successive companies over the years. I am also debt free. Now this is important because while I invested for years, most of those years was at a lower than normal investment rate as I took that money and used it to pay off my mortgage. Approx. 35% of my net worth is the equity of my house. 50% is in retirement accounts, 10% is in a brokerage account that is designed to produce dividends the balance is cash.

So how does this break out exactly?

  1. I have 6 months of my current monthly expenses sitting in a money market account that gets .5% interest. This is an emergency fund.
  • 70% of my retirement accounts I use the “bogle” strat. I use index funds with low fee’s and loads. All of these are long term investments and have provided me with stellar returns. The fund names aren’t critical as long as they track correctly to the index:
    • 75% into an S&P Index fund
    • 20% International
    • 5% bonds

All of the funds in item 2 are investments I have held for several years in some mutual fund for or another.

  • 20% of my retirement is in 2 aggressive growth mutual funds. These focus on small cap funds and I monitor this grouping very closely. I “flip” this 20% often when I make good returns and then shop for new funds in this category.
  • 10% of my retirement is in a precious metals and commodities mutual fund. I have had the same one for years now it’s OK. This is a hedge really but I wanted to be in different parts of the market so I got one fund that invests in several commodities.
  • Brokerage account: this is all about passive income. I invest in singular stocks and mutual funds that have a long term track record of paying dividends. I keep reinvesting the dividends into more shares. The goal here is to build a big enough foot print to provide a good quarterly payout that I will use to supplement my income in retirement. I have many investments here which cumulatively add up to a good chunk of change. However singularly aren’t much.
  • Cash: I have another 3-6 months of expenses sitting in a debit/eft/checking account. This is what I call my “living” account. I want a coffee it comes out of here, gas, groceries. This is where my salary is deposited every month and I disperse from here to my other accounts.

So this isn’t very complex. Most of my wealth is tied into index funds and the equity of my house. The house equity of course isn’t liquid I am sitting on it but having bought the home decades ago the appreciation of the house has made it worth a nice chunk of change and paying it off early meant I saved on interest payments.

As I age this break out will change. When I am 62 I plan to collect Social Security and stop working for a salary. Ideally I will continue to work for health benefits, we’ll see. At that time, I will be shifting the break out and consolidating many of the asset classes into more capital preservation friendly vehicles that generate interest income. Ideally CD rates will be higher, and if they are I will look into them.

CD’s will never outperform the market but the extremely low risk is very attractive as I start to get into my 70’s and enact my legacy planning (for kids and grandkids). Keeping in mind the whole time I will still be living and spending and generating some income.

Anyway, as requested that’s where I am at on my investment portfolio. Thanks for coming by and supporting my blog I really appreciate it.

Finance tip – The Credit Score Secret

So the first finance piece on the blog for 2022 but the same disclaimer…. I am finance professional with 30 years of experience. That said the views expressed on this blog regarding personal finance are my opinion and any financial decisions you make you should do so after having done your own personal research.

If you live in the western world you have a credit score. Now our friends in the east (our Asian and Australian friends) might have something similar, if they do I am not familiar with what it is but its yet another “number” you are given to identify your financial prowess. Now that we are in the midst of the digital age it is very easy to accumulate data on consumers.

Bitcoin is a game changer

Be under no illusion, every financial transaction you make is being stored in some data base and scrubbed as part of meta data for analytics. How many people bought tooth brushes in Dec as opposed to Feb… That data is then resold to manufactures and other large corporations for great profit. Let’s follow the example a bit further… Let’s assume that in Dec tooth brush sales are 300% higher than Feb. That’s critical information for someone who makes toothbrushes, that could be the lynch pin info that creates high profits for their company. You get the idea.

So you as a consumer are given a credit score. It has been pumped up and built up to be a reflection on your overall prowess as an economic entity. Potential employers will do a “credit check” on you. Some dating sites as part of the vetting system perform these checks as a service for their clients. You even have social conversations (well pre covid anyway) where people would actively talk about their credit score as if it were some bench mark for success.

Here is “The Credit Score Secret”

The credit scores purpose is to grade you on your ability to finance material items you can’t afford

Simply put, your credit score is a benchmark on your ability to make payments on items you can’t otherwise pay for outright. Its far more lucrative for a company to sell you something and have you pay overtime with interest. First, they make more over time due to interest and Second, they can up sell you additional services that complement the original purchase.

The bottom line is, you only need a credit score if you are buying something you can’t afford. In my opinion, the only case you should ever need this is when purchasing a house. You should not be buying other items unless you can pay for them outright, and yes that means cars too. I can bend a little on cars but you don’t need a 50K car, a 10K car will suffice. It’s another illusion the finance industry has created for you.

“Give them a score so they can measure themselves against others”. Its clever, sinister marketing. That score is a curse because it really means you have a high probability of purchasing things you can’t afford and paying for them over time. It’s an indication of how poor at finance you really are, financing a TV, A vacation, a phone… It means you’re willing to pay MORE than the item would normally sell for.

Don’t be fooled by the finance industry. They want you to be good little consumers. “payments” means “interest” and interest is pure profit for them. The item is still worth 20k regardless, but you, because you want it now are willing to pay 30K for it over 10 years because you want it now. Companies love that mentality and that is the “credit score secret”

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Some important facts to remember about our current inflation

So I have talked about it on my blog and it is the next boogie man to present itself which is great news for institutional media. They have to have something to scare you with, Trump is gone, Covid is clearing up (WATCH OUT FOR VAIRANTS!!!!!) and there are no wars so we get inflation. Should you be concerned about inflation? Yes, on a scale of 1-10? 3 -4. Inflation kills economies over the long term if (a big if) wages stagnate. If inflation is 3% annual and wages increase 2.5% annual your net to consumer is .5%. In one year that’s survivable. Over 10 years? That’s a problem.

Here are a couple of quick facts to remember about the current inflation situation in the U.S.

  1. The Economy was forced to slow down: We can argue why Walmart was open but local store X wasn’t, or why healthy people were precluded from doing what they want. We can’t argue that government closures and shutdowns due to covid had an adverse effect on production.
  2. Production decreased due to Item 1: Less cars were made, saw mills didn’t produce boards, ammunition production was decreased. And on and on…. The shutdown created a negative production situation as demand did not decrease concurrently due to government stimulus.
  3. Money still flowed: Yes, many people lost their jobs, but government printed money to subsidize those losses. So you had some money, or the same (maybe you worked from home) but you had less places to spend that money.
Maybe Bitcoin is the answer?

So what you have is companies forced to close and the economy slowed. This wasn’t part of the natural business cycle. As a result, less goods were produced, and people lost work, and government printed more money to get to those people. It’s the perfect scenario for short term inflation. Want another example? More people are on the roads now that things have opened up, gas prices go up. Why? Because refining gas was slowed during the pandemic because people weren’t traveling.

Again these are all short to mid-term issues which should begin to clear in the “new normal” my guess is by the start of the 4th qtr. (10.1.21) at the latest. Now anything can happen from now until then. A war, another pandemic, a massive oil spill, political upheaval so there are no guarantees. That said the underlying driver of capitalism is still very powerful, supply and demand. I want something, you have it we make a deal.

Inflation is the new boogey man, many of my younger readers have never experienced it or have read about it in the abstract in places like Venezuela or Liberia. It’s highly unlikely that, that kind of long term sustained inflation hits western economies because of supply and demand inherent in capitalism. Could it happen? Yes, if one of the 3 items on my list continues to happen, even in small doses. Don’t be pulled into the fear mongering, it is a click driver and most rational people can see that. Inflation is here yes, is the world ending because of it? No

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3 questions you have to answer before you invest in Crypto Currencies

Yes, today is another finance piece. As with all financial information given on this blog I want to stress that these are my opinions only. You should do as much research as you need to make sure you are educated and comfortable before making any financial decisions. I have been working in finance for nearly 30 years, I have a lot of experience and knowledge but I am one person, and I don’t know you.

Now disclaimer out of the way let’s talk a minute about crypto currencies. Unless you have been living under a rock you know generally what these are. Let’s get the formal definition out of the way first.

  What Is Cryptocurrency?

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation. Source:

What does that mean in actual application? It means simply that groups of people agree that a virtual currency is worth “X” that group can be you and I, or you, me and your friend Rachel, or the 3 of us and 8 million other people. We can then exchange this currency for goods and services like you would any other currency (like dollars or pesos). It is virtual though, you don’t carry it in your wallet and it is not backed by a government.

Is this guy serious?

That’s how crypto is used, as an investible commodity though should we begin to entertain the notion of investing in crypto’s to diversify our portfolios? The answer is yes, with caveats, three questions need to be answered first.

  1. Are you risk averse? Simply put, does the risk of losing money scare you? Cryptos are a new asset class, unregulated and highly volatile. Yes, you can make a lot of money, you can also lose a lot.
  2. Do you already have a diverse portfolio? Are you just starting to invest, or have you been investing for years with a good spread of mutual funds, cash, other assets?
  3. Do you understand what Crypto is and how it works? Beyond my article have you used it yourself and understand its current application and can logically think about its future application?

These three questions are critical. If you answered yes to question 1, you should not invest in crypto. If you answered no to question 1 move on the question 2. If you answer no to question 2, you should not invest in crypto build up your other asset classes first. If you answer yes to question 2, go to question 3. If you answer no to question 3, do not invest in crypto. If you answer yes, green light go for it.


Question 1: Yes Answer = Do not invest in Crypto. No Answer = Move to Question 2

Question 2: Yes Answer = Move to Question 3, No Answer = Do not invest in Crypto.

Question 3: Yes Answer = Go ahead and invest in Crypto. No Answer = Do not invest in crypto.

This is a very simple formula/questions that should provide you with very basic guidance to whether or not you are ready to invest in crypto. Like any financial advice, do as much research as you can and always trust your instincts.

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