Minutes
AAII Orange County Chapter
Monthly Meeting, June 12, 2010
Balearic Community Center
1975 Balearic Dr.
Costa Mesa, CA 92626
President Bob Welge brought the
meeting to order shortly after 9 am. Beginning with preliminary announcements,
Bob drew members’ attention to the availability of Chapter contact information
and handouts for today’s talk on the side table, and of coffee at the back
table. Bob acknowledged the efforts of the Chapter’s leaders: Facilities Chair
Craig Stoddard, Vice President Ed Castleman,
Treasurer Dave McMillin, and Bill Phillips,
Hospitality Chair, for putting up signs and setting up the room.
Bob next announced the schedule of future chapter
meetings. There will be no meeting in
July. The next meeting will be at the normal 8:45am time on August 21st,
2010, when there will be two speakers. The first is Joe Falcon, presenting Energy—Where
are We Going Nationally and How Do We Get There?. The second is Don Gimpel, from the Los Angeles AAII Chapter; Don’s topic
hasn’t been announced yet, but as anyone who has attended his SIG in Los
Angeles knows, his presentation will be of great value and interest. On September 25th, Roger Shepherd
of Alpha Futures will make a presentation on Managed Futures. Further
details on these future events and other Orange County Chapter information can
be viewed on Bob’s website www.robertsgeneral.com.
Bob then introduced today’s speaker, Leonard Goodall, Co-editor of the advisory letter No-Load
Portfolios, whose presentation was entitled Lessons Learned
from the Market Declines of 2000-02 and 2007-09. In all, there are 6
lessons that Leonard covered.
1. The
importance of Asset Allocation was first. Asset diversification is
critical because no one can predict the future accurately. One should select 3
categories of assets, including allocating 40-75% to stocks, and the remainder
allocated to corporate bonds, government bonds or T-Bills according to the
individual’s preference. Such a relatively large portion should be allocated to
stocks because while stock returns outpace inflation 100% of the time over long
periods, bonds only outpace it 60% of the time, and T-Bills only 42%. The
chosen allocation should be rebalanced once a year.
2. One
needs a Wealth Protection Plan to limit losses. The first point of the
Plan is Lesson 1 – asset allocation. Second, one needs to set sell points –
Leonard personally won’t take more than a 15% loss. He manages this by using
stop loss orders (despite the May 6th meltdown). Among other
recommended means to limit losses are short selling and the purchase of put
options.
3. Leonard
stressed the need for some Asset Liquidity and provided a good gauge for
knowing how much is needed. Each investor should estimate how much of his
assets will need to be spent in the next 3 years, and set aside that amount.
Why 3 years? – because the market declines 1 year in
3, and one doesn’t want to be forced to sell at a market low.
4. One
needs to Invest Systematically, a set amount every month or quarter.
5. Individual
investors are advised to select actively managed funds, and otherwise
only manage by themselves the amount they can afford to lose without affecting
their lifestyle.
6. Control
what you can control. Namely, choose no- or low-load funds with low annual
expense ratios (<1% is recommended), intelligent tax strategies and low
portfolio turnover. If eligible, be certain to take maximum advantage of any
retirement program with employer-matched contributions.
During a question-and-answer
session, Leonard mentioned the Vanguard Increasing Dividend Fund (VIG) as a
current recommendation. He also said that asset allocation might now include
3-5% in gold in addition to the asset classes mentioned in the main part of his
presentation. He also said he considers California municipal bonds to be
speculative.
Following the conclusion of Mr. Goodall’s
talk, Bob Welge adjourned the meeting at 11 am.
____________________
Minutes Recorded by:
Ed Sharman