Starting Out...

One of the questions that I get asked by folks staring their investment journey is...How do I start ?

My advice:

--Start by investing in a Balanced Mutual fund at one of the premier fund families like Fidelity, Vanguard or Trowe price. First time around you have to pony up enough to meet the minimum requirement. This is typically around $2500. More on balanced funds later in the post.

--When you open an account, choose Automatic Investment Plan, where fund withdraws $100 every other week from your bank account or whatever small amount that you can budget.
As time goes on, increase this minimum amount.

So why this advice ? First let's start with Balanced fund. What is a balanced fund ? A balanced fund is a fund that would invest certain portion of portfolio in equity (i.e. stock market) and certain portion of portfolio in bond market (fixed income). Balanced funds provide you with a decent upside potential with less volatility. It also fares well in bear market years.

Next let's talk about Automatic Investment Plans. This is great for many reasons.
--Forces you to save
--dollar cost averaging. It is very hard to time the market. If you could time the market then you should be running a hedge fund.

Most of the new investors look at only year to date performance data of a mutual fund. Don't !! Look at the performance data provided by sites like http://finance.yahoo.com. Look for 10 year performance. Look at how funds behaved in last bear market.

Some of the balanced funds that I have owned or still own are:

• Fidelity Balanced Fund
• Vanguard STAR fund
• Vanguard Wellington Income Fund
• American Century Equity Income Inv.

T Rowe Price also has T. Rowe Price Balanced.

I recently read an article on Yahoo Finance site that reflects this sentiment.

Speculative plays..

To make investing fun and expose myself to different financial instruments, I dabble in Options trading every now and then. I usually do this with few Ks at a time.

My current option plays are:
--Jan 45 call options of CROX
--Jan 220 Call option on GS

This year I have made some money with options in CVS, TMO. Last year I lost money in BBY and TRID. That's how it goes with options trading.

Given that rest of my portfolio is very conservative, this may be little puzzling. Even I don't get it :-)

Value investing

I am looking at increasing exposure to value plays as market may be getting little frothy. I have been holding Berkshire Hathaway Class B shares BRKB for 9 years. Return so far has been 64% over that time. Not great. But this is a long term investment that provides cushion in bear market years and still beats S&P over that time.

I recently added US Bank USB. I like their track record. It is going to be an investment taht I will hold for another decade. Financials are out of favor right now because of rising interest rate concerns and sub-prime fiasco. But that's ok. This will resolve over time.

Other names that I am watching are:
--Fairholme funds (FAIRX). They have same philosophy as Buffet. They hold a large chunk of BRKA and they also invest in companies that Buffet invests in like Wesco and USG.

--Brookfield Asset Managment (BAM).

I may sell some of my investments in CSCO and get into these names or use new money to get into this.