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Joseph Sangl’s Current Investments – 2018

Full Disclosure: I am not a certified financial planner, nor do I sell investments, insurance products, or other similar financial products. My goal in sharing this information is to shed light on a topic that few people understand well. It is my hope that this information will help inspire more people to climb the I Was Broke. Now I’m Not. Ladder (download a free copy HERE) and become wise investors so they can live fully funded lives.

=| 2018 INVESTMENT UPDATE |=

It’s that time of year again where I review my current investments and take a moment to philosophize about the future of investing.

My investing activity is driven by a powerful truth: “There is no HARVEST if you do not INVEST.

Just as a farmer can not have any hope of a harvest if seed isn’t put into the ground, we can not expect to reap a financial harvest if we do not invest! In May, I will have been an active investor for 22 consecutive years. That is half of my life! For the first six years, I invested exclusively into market-based investments via a company retirement plan (401k), college savings plan (529), and a small stock trading account. Since that time, I have diversified into real estate and small business along with a dabbling in precious metals. This approach has yielded excellent results.

As I prepare this report each year, I always take time to review previous updates I have provided. A statement made in my 2007 update bears mentioning again: “Many people are diversified WITHIN the stock market. It is also important to be diversified OUTSIDE of the stock market.” I encourage all investors to invest within the stock market, but to also explore other investments such as real estate, small businesses, franchises, or precious metals.

One of the most common questions we receive here at I Was Broke. Now I’m Not. is: “What investments do you recommend?

My answer is always, “I don’t recommend specific investments. I can only tell you the investments I own, and they have worked well for my family. The investments you choose are up to you.”

Below is a chart of my current investments – click on the chart itself to download a printable version.

The market experienced amazing growth over the past year. From my last update on March 30, 2017, the markets have soared. Aided by decreased regulation, major business tax reform, increased consumer confidence, increased capital spending, a fully employed workforce, and an improving worldwide economy, all of the major market indices have experienced substantial growth. The Dow Jones Industrial Average has increased 20.01%, the S&P 500 by 16.90%, and the NASDAQ by 28.24%.

Throughout the year, I continued to actively trade stocks. I have sold several individual stocks while deepening my investment into others. Overall, my investment strategy has continued on a straight-forward path of maintaining a balanced portfolio with approximately 32.64% real estate, 27.01% small business, 24.66% stock market and 11.57% cash.

My views of the investing market place:

  1. Stock Market Strength  There has been significant earnings growth which has supported a substantial increase in company valuations. One key measure to track is the “P/E Ratio” – Price-to-Earnings. This is the ratio between share price and the earnings per share. Currently the DJIA is priced at 26.17 times earnings (it was at 21.12 last year!) and the S&P 500 is priced at 25.86 (it was at 24.68 last year). This is not sustainable. One of two things must happen: earnings must increase substantially or share prices will drop. My belief is that a combination of the two will happen. Earnings will indeed grow due to tax reform while share prices will moderate to achieve a more reasonable P/E. (Side Note: My weighted balance P/E Ratio for my individual stock investments is a more acceptable 14.58). While I could be wrong, it is difficult for me to see major growth within the stock market in the near future.
  2. Turmoil and Roiling  There will be deals available in public markets, but I suspect they will be related to companies that experience major breakthroughs in new products or services.
    • Amazon is one of those companies that seems destined to completely redefine consumer behavior in multiple industries. Most of my mutual funds hold a substantial position in this company. “The Investment Company of America” [AIVSX] holds it as their third largest holding (2.7%), “Fundamental Investors” [ANCFX] holds it as their second largest holding (3.8%), and it is the top holding (6.9%) for “The Growth Fund of Ameria” [AGTHX].
    • Interest rates will be going up which will create earnings pressure for highly leveraged (meaning: lots of debt) companies. You can see the debt load of a company by looking at their Balance Sheet.
    • Oil prices have been creeping up as well. This can create pressure on earnings also for companies highly dependent upon transportation of their goods or for delivery of their services (think: airplanes, freight companies).
  3. Deals will be found – but they will have to be looked for! As I travel throughout the nation, I still see enormous amounts of building activity. Cranes in the skyline of every major city, new subdivisions being constructed, and lots of activity in the mortgage industry. The travel industry is on fire with hotel, car rental, cruises, and air travel all issuing price increases. Will this be able to continue to grow? If the answer is yes, then we must ask the next question: will it be able to grow profitably?
  4. Tax Reform  With more money going into the pockets of an estimated 87% of tax-payers (figures vary), I’m confident that Americans will do what they do very well: spend more money. This will continue to stimulate the economy with a measure of growth.

I will continue to invest in both individual stocks, index funds, mutual funds, real estate, and small businesses. Occasionally, I might pick up some shiny metal (the silver-colored one) along the way.

I welcome your thoughts on the investing market place as well. What do you think? What are your strategies?

My favorite investing information I’ve encountered over the past year:

Warren Buffet’s annual letter to shareholders (2016 lettertakes a few seconds to download, but well worth it)

  • I found Warren’s discussion of comparing hedge fund investing with index funds to be very compelling.  I dare you to go read it. It begins with the last paragraph on page 21 and continuing through page 24. I found it to be both wildly entertaining and tremendously enlightening.
  • In his 2017 letter, Warren writes the concluding piece to this discussion and “the bet.” I triple dog dare you to go read it. It begins with with the third paragraph on page 11 and concludes on page 14.

Read previous installments of Joe Sangl’s “Current Investments” posts HERE.

How to Sustain Good Financial Decisions: AUTOMATE

We’ve all had moments where we have firmly stated our resolve to do something different with our money. Usually the outburst follows a negative financial outcome. Perhaps we’ve overspent on our vacation. Maybe we have the starting realization that there is no money in the college fund for our high school senior. It could be that we’ve dipped into the overdraft account again. Whatever the case may be, it causes us to commit to better financial management.

Here are some common statements people make in these moments:

  • “I’m going to start preparing a written budget each month.”
  • “I’m increasing my contributions to the retirement plan.”
  • “Let’s open a 529 college savings plan and begin making monthly contributions.”
  • “I’m cutting up the credit cards.”

There is just one problem with each of these statements: saying it doesn’t make it true.

For every statement and moment where we commit to better financial decisions, one must actually do the work to follow through. And, my friends, we all know that it is truly hard work. Life is so busy. We’re exhausted. Plus, many of these decisions require information and knowledge we may not currently possess. This is a recipe for failure to follow through on really good financial decisions.

And we’ve all been there, haven’t we?

Let’s flip the script, and put in place some “best practices” that can really help us sustain these good financial decisions so that we can reap the benefits they can provide us: fully funded lives, dreams accomplished, and freedom to live generously.

Sustain Good Financial Decisions – Practice #1:  AUTOMATE

Many good financial decisions can be followed through with automation! This is perhaps the easiest and best tip possible because it is literally a “set it and forget it” solution that ensures your financial decision is put into practice. If there is any possible way to automate your decision, do it.

Here are some great examples of using automation:

  • Committed to save money every month for the annual family vacation? Set up automatic drafts from your bill paying account to your savings account.
  • Want to help your child with college expenses? Open a 529 college savings account and establish automatic drafts.
  • Ready to up your retirement investments? Log in to your 401k (or similar RSP) account and adjust the automatic contribution.
  • Want to ensure your retirement money is put to work right away instead of sitting in a savings or money market account? Establish automatic investment selections.
  • Want to ensure all of your bills are paid on time? Automate every single bill payment. As an added bonus, you will spend far less time paying bills!
  • Want to ensure your retirement investments become more secure as you approach retirement? Choose a targeted retirement date investment fund that will automatically become less risky as you near retirement.

What good financial decisions have you been making that could leverage the power of automation to ensure they are sustained into the future?