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Fine-Tuning the Mountain Method
The Mountain Method is one of the easiest
plans for long-term investing
available.
To take even greater advantage
of the peaks
and valleys of market prices
you can follow
our Advanced formula. The rewards
are greater
with no additional risk. It takes
a little
more time to set up, but it's
almost as easy
to readjust each year. Don't
forget to follow
the Ground Rules, and if you have questions, consult our
FAQ.
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The Advanced Mountain Method: |
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- Place Your Money in More Sectors
You still maintain the 60/40 Lazy Ratio,
but you place your money in different investments,
each fluctuating at different times. When
you readjust, you lock in profits and invest
in bargains.
- Choose Non-Overlapping Sectors
We'll do it for you, or you can choose your
favorites. Keep in mind there should be no
overlap among investments. For example, a
Total Stock Market Fund already contains
the companies in the S&P 500. To add
an S&P 500 Stock Fund to your portfolio
negates the advantage of having different
stocks fluctuating at different times. We
recommend starting with one of our Sample
Portfolios and over time make small changes
based on your knowledge and experience, but
not based changing market conditions.
- Keep It Simple
It would be easiest to apply the Mountain
Method if you were to invest in different
funds within one investment family or one
that allows you to invest in different funds
but keeps your account in one place. When
The Big Picture includes your 401k, your
IRA, your spouse's accounts and your broker
account, you might want to create a spreadsheet
to track your fund balances. But don't let
multiple accounts keep you from starting
your investment program today.
- Let's assume we have a $100,000 portfolio.
It's a nice round number, and you can easily
convert the numbers to the amount you have
to spend. Start on Day 1 with your allocated
amount and leave it alone for one year.
In
our Sample Portfolios, we assumed some
stocks
did well, others not so well, and Bonds
and
Money Market Funds plodded along with some
modest interest rates.
- At the end of the first year, you will adjust
your new "Balance After 1 Year"
by the "% of the Portfolio" and
buy and sell the investments based on the
new values. Since we're Lazy Investors,
you
can also ignore any changes of less than
1% of the portfolio, and adjust only those
balanced that exceed that amount. In Portfolio
#1, you can see in the "Lazy Readjustment"
column you only need to adjust 3 balances
for this year.
The Advanced Mountain Method Portfolio #1
| Investment |
% of Portfolio |
Balance on Day 1 |
Balance after 1 Year |
Readjusted Balanced |
Lazy Readjustment |
| S&P 500 Stock Fund |
25% |
$25,000 |
$31,000 |
$26,750 |
$26,600 |
| International Stock Fund |
20% |
$20,000 |
$22,000 |
$21,400 |
$21,400 |
| Small Stock Fund |
15% |
$15,000 |
$13,000 |
$16.050 |
$16,000 |
| Bond Fund |
30% |
$30,000 |
$31,600 |
$32,100 |
$31,600 |
| Money Market Fund |
10% |
$10,000 |
$10,400 |
$10,700 |
$10,400 |
| Totals: |
100% |
$100,000 |
$107,000 |
$107.000 |
$107,000 |
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- In Portfolio #2 we have further split our
investments into different sectors. You
might
experience wider fluctuations, and, as
in
this case, some greater gains. Remember,
it's the peaks and valleys that help us,
so the more the merrier. We have chosen
a
few investments that may not suit you like
Mid Stocks and Real Estate Trusts, so,
even
those have a good track record, you could
substitute these lesser investments with
something more to your liking, such as
a
Sector Fund. As before, make sure there
is
little overlap among the holdings of each
fund.
The Advanced Mountain Method Portfolio #2
| Investment |
% of Portfolio |
Balance on Day 1 |
Balance after 1 Year |
Readjusted Balance |
Lazy readjustment |
| S&P 500 Stock Fund |
15% |
$15,000 |
$18,000 |
$16,500 |
$16,500 |
| US Mid Stock Fund |
10% |
$10,000 |
$8,000 |
$11,000 |
$11,000 |
| US Small Stock Fund |
15% |
$15,000 |
$17,000 |
$16,500 |
$17,000 |
| Int'l Europe Fund |
5% |
$5,000 |
$5,600 |
$5,500 |
$5,600 |
| Int'l Emerging Market Fund |
5% |
$5,000 |
$6,000 |
$5,500 |
$6,000 |
| Int'l Asia Fund |
5% |
$5,000 |
$8,000 |
$5,500 |
$5,500 |
| Real Estate Invest Fund |
5% |
$5,000 |
$4,000 |
$5,500 |
$5,500 |
| Long Term Bond Fund |
15% |
$15,000 |
$16,000 |
$16,500 |
$16,000 |
| Short Term Bond Fund |
15% |
$15,000 |
$17,000 |
$16,500 |
$17,000 |
| Money Market Fund |
10% |
$10,000 |
$10,400 |
$11,000 |
$10,400 |
| Totals: |
100% |
$100,000 |
$110,000 |
$110,000 |
$110,000 |
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- In Portfolio #3 we take into account that
you have some special investments or preferred
selections. In this Sample we will include
the equity in a 2nd home and that your
spouse
has an employer-supplied annuity. These
special
investments might be hard to readjust each
year, so you can increase or decrease other
balances to bring the overall percentages
back in line. In some cases the market
prices
will eventually fall into place if you
just
leave them with no changes.
The Advanced Mountain Method Portfolio #3
| Investment |
% of Portfolio |
Balance on Day 1 |
Balance after 1 Year |
Readjusted Balance |
Lazy readjustment |
| S&P 500 Stock Fund |
20% |
$20,000 |
$18,000 |
$16,500 |
$16,500 |
| US Small Stock Fund |
10% |
$10,000 |
$17,000 |
$16,500 |
$17,000 |
| Int'l Stock Fund |
10% |
$10,000 |
$5,600 |
$5,500 |
$5,600 |
| Real Estate: 2nd Home |
25% |
$25,000 |
$4,000 |
$5,500 |
$5,500 |
| Cash Annuity |
30% |
$30,000 |
$16,000 |
$16,500 |
$16,000 |
| Money Market Fund |
5% |
$5,000 |
$10,400 |
$11,000 |
$10,400 |
| Totals: |
100% |
$100,000 |
$110,000 |
$110,000 |
$110,000 |
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