My year end process typically involves pulling together an one page summary of the previous year that I share/review with my spouse to keep them in the loop on our financial progress. The process also gives me some time to reflect on what I've learning in the past year and what mistakes have been made that should be corrected.
For 2017, a few of the lessons I've learned, in no particular order, are:
- maintaining your own bond ladder is harder than it appears. In a low interest rate environment, the bias, or perhaps desire, to eke out the last possible basis point has a tendency to lead to analysis paralysis. This point is driven home by
One further reminder that I'd add, remember the function of fixed income in an investment portfolio and that one should take risk on the equity side of the portfolio. Extracting the last extra basis point, although human nature, is essentially pointless. Hopefully going forward I can overcome this tendency.AltaRed wrote: ↑05 Jan 2018 14:55
It seems to be a 'spot' opportunity, or perhaps a few days at most depending on who is shopping when. When I have a bond come due, I will give it up to a week to shop for bargains...and then I just bite what is available. Life is too short to scrub through daily offerings very long.scomac wrote: ↑05 Jan 2018 11:35 Indeed. AS fate would have it I was looking this morning at the offerings in 1 to 4 years maturity and ran across a couple of small lots that were trading a good 30 points higher YTM than their peers. Problem is my bond doesn't mature until April 01, so who knows what will be available at that time.
Reflecting on this and using the forum search function a bit, Optimal bond ladder structure?, Fixed Income - Bonds, Real Return Bonds, Laddered? and % of fixed income to put in corporates vs gov't are definitely worth a re-read and perhaps rethink my whole strategy on the fixed income side of things. - That all said, having a written Investment policy statement (IPS) is extremely important part of the investment process. It doesn't have to be complicated, in fact I've come to the opinion that if it is complicated or just plain too hard to write down, then you probably need to step back and rethink what you are trying to accomplish as an investor. Keep it simple comes to mind. And remember it's written on paper (or electronically), not stone, so it can reviewed/updated as you learn new things or circumstances change or time passes. It doesn't need to be perfect either, remember "The enemy of a good plan is the dream of a perfect plan.”
- Over the past couple of years my adult children have started to build up some 'investable' assets. Like many their age, there is little to no interest in learning about investing. As with my spouse, most certainly they have no interest in the investment process/strategy that I employee. They will likely never be stock (or bond) pickers. With what I've learned over the past decade or so about investing and with the benefit of a time machine, I probably wouldn't be either. The key learning that I've tried to share with them is 'do what I say, not what I do'. Simple index portfolios are a great solution for most. But they are boring. Boring works though. That said, they do still require a small amount of annual work to handle ongoing contributions and any necessary rebalancing to follow one's IPS. Don't neglect that step.
- Over the past couple of years I've also become involved in assisting my parents in managing their financial affairs. That has also served as a reminder that simplification of one's financial affairs wherever possible is a good thing. Sure many like to play the "get the best rate" game, but what is the ongoing maintenance cost of this endeavour?
- I've used Quicken since the DOS days to record and track the state of our financial affairs. On the banking side of things I've developed a habit of regularly updating/reconciling that works for me. On the investing side of things I tend to 'batch process' annually (or worse). That's been a bit of a mistake as it now takes too long and therefore I lose interest in putting in the effort. The work is just repetitive, but necessary. Particularly come tax time it is important to have up-to-date and accurate records to make things as painless as possible. Thanks to
for the reminder on this point.