Evil Credit Card Debt

I can't believe how many of you are paying interest on your credit cards! Yes, I know you may not have enough to cash to buy stuff, but borrowing on your credit card is not the way to do it. Nothing saps your funds worse, unless you married Paul McCartney's wife.

Talk to your bank. Even a high interest loan is better than the higher interest loan the credit cards charge you, and then there are fees on top of that. Like those anti-crack commercials on TV: Don't Do It!

Fortunately, more of us are using debit cards. Your rights with them are different than credit cards, but they are a much better idea, unless you can pay off your credit card each month. Better yet, join those of us who are actually getting cash back from our credit cards. That will help pay off a more reasonable bank loan. Then you'll have some money to invest for your future fortune. Discipline is easy once you start...but start.

No News is Good News

Mountain Mom keeps bugging me about keeping up on making regular posts to the blog, but I keep reminding her when things are moving as expected, there's nothing to say. The stock market is crawling back up, however, more people are out of work. These two statistics need to eventually agree with each other.

In the meantime, those of us who rebalance quarterly are about to take a few profits off the table and pick up some bargains. Then, we'll be in position for the next market move. Until then, we're not thinking about investing, we're out skiing. Wanna join us, Mom?

The Market Is Up & I'm Down

When I was still working in the corporate cube, my cell-mates would complain when the price of our company stock started slipping. My response was always, “it's another buying opportunity!” Now that stock prices look like they’re on the rise, I can’t help but think my buying opportunity is lost.

Of course, I’m really lamenting about not jumping into the market with both feet at DOW 6500, and adding a few more bucks each time it passes another 1,000 threshold. After all, one of the main features of our “Mountain Method” is dollar cost averaging, which you couldn't do if you jumped all in at the bottom.

But who knew when it was the bottom? I didn’t, and when you start buying stocks, you need to sell something else. So, once again, we need to remind ourselves, if it's not rebalancing time, it's time to do something else. We can add to our portfolio in small bits right now, but no exchanges just to jump deeper into the market because the trees look like their growing toward the sky again. They're not.

Don't Let Mom Rush You

Well, I do live with the woman, so I thought it might be good to consider her ideas and report on them here. It seems Mountain Mom has made a few more Blog posts than me, and she claims I need to start working harder in explaining my Mountain investing method.

I tried to explain to her that the beauty of Mountain Method investing was that people can 'set it and forget it.' You can rebalance just once a year and come out ahead comfortably. She says the beauty of blogging was sharing a fresh perspective when your feelings and needs change. Well, my feelings might change, but my long-term investing needs don't. She says "Precisely. That's just what you need to report on. Steady as she goes."

So, it isn't rebalance time, yet. And, unless you think we're having a "W" shaped recovery, instead of a "V", yes, it time to sit and be 'steady as she goes,' Happy, Mom?

Nervous About the Market!

I can't believe I'm fretting about the improving stock market! It's going up and each day I feel like it's another opportunity lost. I need to turn off CNBC and go back and look at my most recent portfolio changes. It was about 2 months ago that I filled in some of the "valleys" and increased my position in certain types of stock.

So, that means I'm on the escalator, right? Yes! But hindsight is 20/20. Why do I keep kicking myself for not going all in at Dow 6500? Because there is also a Dow 3000. For those of you who rebalance only once a year, what's the fun? I'll tell you. The fun is staying away from the edge. While we don't know what the market will do, we know what the market can do...to us!

I'm going to stop worrying now. From my MountainInvestor home page, "control the things you can." What can we control now? Cut costs and keep on saving, saving, saving. I'm rolling up my sleeves.

Rebalancing- It Should be Automatic

I finally finished rebalancing. I started the process in January, and didn't finish until July! Here we are trying to convince YOU to follow the rules when we can't follow them ourselves. In retrospect, it's good to make the changes blindly and worry about what happened much later.

Today, I am not worrying about what I did in January. I am facing my own human frailties about how much emotion is involved in investing. Also, I have re-assessed just what constitutes "cash". How much that is invested in an annuity can indeed be considered cash, especially when it still gets a 3 to 5% interest rate. You just can't rebalance with it as easily. It may be smarter to invest in an immediate annuity right at retirement time, but after this past year's turmoil in equities, it certainly looks smart to not have some of your funds in stocks or bonds.

It's also good to consider rebalancing just once a year, and forget it in between. I have already abandoned the once per quarter rebalance timetable. But you gotta do it...and on time.

Rebalance Challenge

I was looking forward to leveling out my mountains and valleys among investments, but something odd has happened...I don't have enough cash to rebalance! It seems that in this extreme economy, the bulk of my exchangeable cash is in bonds, and the bond funds have taken a hit as well. Also, the bulk of MountainMom's cash is in a large annuity.

So here's what I am trying to do. I will be making as many exchanges as possible without totally depleting my cash assets. This means I will be buying as many stocks as possible, mostly in the S&P 500 fund. To do this properly I will be selling a small percentage of bonds. Also, it's time to put some more money into our IRA's, some of which will go to buying these cheap stocks, and some will go to build up new "cash" reserves, probably in some kind of money market fund. And the only reason I'm putting any money into cash now is to have something to buy with at the rebalancing next quarter.

All of these moves take a leap of faith. But buying low and selling high is what works, and it has never let me down. Fortunately, MountainMom and I are able to invest another $6,000 each in our IRA's, and this is a great source for buying stocks. Yes, it is unnerving to watch those stocks drop the next day, but they will trade within that same low range for weeks to come. You need to be in the market when the recovery starts, and the worst thing to have happen is to see stock prices rise, and think it's too late to get back into stocks. You miss the initial jump, and then those that follow.

This is unnerving enough to make me think I should start rebalancing no more than once a year.

Forgive Me for I Have Sinned

Over the past 2 months, I noticed all the low stock prices and went ahead and bought a few shares in a couple of mutual funds. A little voice inside me said, "there's no way these stock can go any lower!" And the next day they indeed did go lower. What was I thinking?

Yes, I was completely ignoring my own directive to only buy when it's time to readjust the Mountain Method. Lord help me, I now see that I was Market Timing. But at the time the siren call was sooooo loud. "Buy." "Buy," they said. Fortunately, an even louder voice eventually yelled at me, "follow your own advice, dummy!"

Fortunately, it was only a very tiny percentage of our portfolio that was traded and I was reminded of my folly a few weeks later when the mutual fund mailed a confirmation of my big $1,000 transfers from the Bond fund to the S&P 500 Fund. And boy was Mountain Mom irritated that I generated that unnecessary paperwork that will eventually end up in a landfill.

I needed to slap myself a few times to get back on the path of righteousness, and I did it by reminding myself that my next rebalance day is but a few weeks away. It is at that time I will be trading fairly large amounts of money with the full confidence that it matters not what the market does the next day. It will be all good just a little farther down the road.

Don't you go listening to the call of cheap stocks. Stop watching CNBC and watch the Weather Channel instead.

Exceptions to the Rebalance Rules?

The Mountain Investor site is a cooperative effort among several friends, but we have been rather UN-cooperative about one aspect. We disagreed about recommending off-track rebalancing with the Mountain Method if the market dropped 20% or more. If we have done that when the market hit the -20% mark, we would be feeling let down right now with the market down closer to 30%. So, for now, the 20% idea remains on hold.

It is a demonstration how veering away from our diciplined method of rebalancing only on a set schedule has its perils. I have chosen to rebalance every quarter and at the next rebalance day I will be excited to see how many changes need to be made to maintain my chosen balance.

You haven't sold anything yet, have you?

Starting at the Top

We started the Mountain Investor web site during high times in the stock market. The basics of the Mountain Method have not changed now that prices have dropped. The next few months should provide an extraordinary buying opportunity, and a chance to Average Down some of your positions.

Just remember to stay the course. Wait for your chosen time to make changes. I know it's hard, but your Dad is here to help you grit your teeth and overcome your fears. At least for now.