So I am trying to figure out how to arrange my portfolio, and what needs to be addressed. Here are some ideas I think I should do:1) Get my money out of cash that is sitting in brokerage accounts. I am thinking of moving it into a S&P500 ETF as a "placeholder". (I've got around 7k just sitting around that has been sitting around for years and it is annoying me that it isn't in the market)2) figure out where my assets are. I honestly don't know how much money is in foreign investments, REIT's or domestic stocks. I have a rough idea, but very very rough. I think I should submit my portfolio to the X-ray tool on morningstar.3) Figure out a new financial plan. As I mentioned, I am about a year ahead of schedule according to my original plan (set up 3 years ago). It could be as simple as using the original plan, but plugging in todays numbers. It is a quarterly plan. It reports goals for each quarter. I should come up with new quarterly goals.4) Determine what to do with the cash accumulating. I have been allowing cash to gather, because I feel my job is insecure, because it is almost enough to pay off the house, and because I am hesitant to put this money into the market that is not tax protected. I am leaning towards paying off the house, which would reduce my income requirements and serve as a low yield bond, which seems like a decent conservative plan. Perhaps too conservative.5) Get together the paperwork for investments for the close of 2006 and file them all in one place for future posterity.
1) Get my money out of cash that is sitting in brokerage accounts. I am thinking of moving it into a S&P500 ETF as a "placeholder". (I've got around 7k just sitting around that has been sitting around for years and it is annoying me that it isn't in the market)A lot of hesitance about investing in stocks is because of uncertainty about what to do. This uncertainty occurs because people don't really know how to intelligently manage stock-like investments, and there isn't all that much GOOD help out there. The available advice and instruction is mostly about what to buy, where the most important challenge is to know when to sell - and then to actually hold the stock until the sell point, and finally to actually sell it at the sell point.There are MANY good answers to the question of when to sell. But they all involve picking a sell rule and then actually living by it.Some sell rules match better with certain sorts of investment than others. If you invest in a broad market index and your sell rule is "not until I need the money for post-retirement expenses", and you don't panic and sell early, you stand an excellent chance of making a decent, but not outstanding, long-term rate of return. The same sell rule is not a good choice if you're investing in long-shot startup companies.You may want to visit the Mechanical Investing board here at the Fool. There the standard procedure is to set up a screen that looks at data for hundreds to thousands of stocks (the two major sources are ValueLine's 1700 picked stocks, and a complete 8000-plus-stocks US-markets data feed available at several places including Reuters' free PowerScreener Lite) and discards all but a few; you periodically sell stocks you own that aren't currently picked by your screen, and buy the ones you don't own that your screen picks. "Periodically" can mean once a year, so that your profits are long-term gains and thus somewhat tax-privileged. Or more frequent, because a 30% gain taxed at 30% is better than a 15% gain tax-free. There are a couple engines where you can test how a screen would have performed over the last several years (depending on the screen and the engine, this can extend back into the 1970s).(Warning: the MI board has been operating since the Fool's early days and most of the participants have been there for years; it has developed a fair amount of technical terminology.)4) Determine what to do with the cash accumulating. I have been allowing cash to gather, because I feel my job is insecure, because it is almost enough to pay off the house, and because I am hesitant to put this money into the market that is not tax protected. I am leaning towards paying off the house, which would reduce my income requirements and serve as a low yield bond, which seems like a decent conservative plan. Perhaps too conservative.You do need a certain size emergency fund, and if your employment is insecure a fund that would allow you to handle a year of unemployment is not unreasonable.And you also want any money you expect to need in the next 2-5 (you decide exactly how many) years to be in stable liquid investments: cash-like, not stock-like or house-like.Beyond that, though, the virtue of extra cash is limited. Paying down interest-bearing debt, including your mortgage, is probably smarter than sitting on lots of cash. But investing in stocks may be smarter yet.And an early retiree has a greater need for NON-tax-sheltered assets than a person on a typical schedule. Early-retirement withdrawals from a 401K, 403B, or IRA are complicated; from a Roth IRA, they are effectively double-taxed. (A 457 plan, which is another variant on the 401K, is a much different and friendlier animal for the person who has already retired early. But the possibility only exists for non-school government employers, and it's the employer that chooses. And it's no help if you plan to spend a slug of cash preparing for retirement, but before actually retiring.)Remember: on the day you retire, most likely some portion of your investment portfolio is still looking 30 or more years in the future.
If you feel your job is insecure, don't pay off the house now. Keep that $ liquid as an e-fund. You can aloways use it to pay off house later if you need to.
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