Wow - it hurts!

What a week - as soon as I wrote my last blog to take up some positions for 2008, market tanked by 4% and it's on way to crash another 4-5% when it opens up tomorrow. All world stock markets are down from 4 to 10% on Monday and Asian markets are again down on Tuesday.

Is it start of bear market (some indexes are already down by 20% - classical definition of start of bear market) or is it another buying opportunity similar to Feb 2007.

Stock markets have wiped out all the gains (and some more) of 2007 and trading like end is near. Here are my predictions (I am sure many of them would be wrong in few days:-)

• Markets will be very volatile for whole of week with triple digit moves on Dow (and possibly Nasdaq)
• Fed will reduce rates by 50 basis points definately by Jan 30. I won't be surprised if they lower the rates before market opens on Tuesday 1/22
• Stock indexes will go down in early week and then recover ground later this week to break even for the week. Dow will test 11800 this week

So what do we as investors do ? My recommendation is to selectively invest in indexes like MSCI emerging markets and little bit in mutual funds focussed on financial services.

VANGUARD TOTAL INTERNATIONAL ST (VGTSX) is excellent way to get exposure to developed as well as emerging markets and capture excellent gains provided due to volatility across the world stock indexes. Invest little bit of money every week in this for cost averaging

While it hurts to see portfolios down by 10-20% within first 3 weeks of new year, if you are long-term investor, this is an excellent opportunity to put more money to work.

Good luck and good night !

It's time to take some positions for 2008

My first blog update of 2008 - happy new year to all of you readers!
I was watching the ups-and-downs of market for last two weeks and finally decided to write after I got convinced that we have seen the worst in stock market. Now that Dow is close to 10% down from its peak and Nasdaq is back below 2500, how worse can it get. There are some signs emerging which confirm my theory that we are very near (if not at absolute bottom) of the market.

As promised, here is update on model portfolio I constructed at start of 2007 which has returned 15.7% compared to S&p returns of about 5.39% nearly beating it by 10%. Most of the contributors to this decent performance was mutual funds focusing on emerging countries and oil-sector. It's no wonder that my two stock individual stock picks (Cisco and Yahoo) were worst performers - other than real estate mutual fund.

Investment	Quantity	1/5/2007		1/1/2008
		Rate	Amount	Amount	%Gain
UUPIX	156	32.09	$5,006	$8,558	71.0%
FSESX	80	62.69	$5,015	$8,333	66.2%
FXI	47	105.94	$4,979	$8,011	60.9%
TABRX	397	12.61	$5,006	$7,563	51.1%
VEIEX	211	23.68	$4,996	$7,120	42.5%
VGTSX	573	17.46	$10,004	$11,934	19.3%
VDMIX	803	12.46	$10,005	$11,222	12.2%
VWEHX	804	6.22	$5,000	$5,300	6.0%
VFINX	77	129.87	$10,000	$10,407	4.1%
$$CASH	1	5000.00	$5,000	$5,000	0.0%
VSTCX	492	20.31	$9,992	$9,704	-2.9%
CSCO	527	28.48	$15,010	$14,266	-5.0%
YHOO	180	27.76	$4,996	$4,187	-16.2%
VGSIX	198	25.21	$4,991	$4,110	-17.7%
Total ($):			$100,000	$115,715

Now that market is near bottom, here is model portfolio for 2008 - my goal is to beat S&P by at least 2-3% by year end.

Overall distribution:

Stocks	$25,000
Domestic Equity	$32,500
International Equity	$32,500
Bonds	$10,000
Total	$100,000

Portfolio:

Investment	Name	Quantity	1/14/2008
			Rate	Amount
CSCO	Cisco Sytems	190	26.29	$5,000
AMZN	Amazon	60	82.87	$5,000
RDN	Radian	532	9.40	$5,000
PAY	Verifone	288	17.34	$5,000
CSIQ	Canadian Solar	231	21.67	$5,000
VEIEX	Vanguard Emerging	229	32.73	$7,500
VGSIX	Vanguard Real Estate	527	18.98	$10,000
VGTSX	Vanguard International	646	19.36	$12,500
BKPIX	Profunds Ultrasector Banks	299	25.07	$7,500
VFINX	Vanguard S&P 500	57	130.44	$7,500
UUPIX	Profunds Ultra Emerging	184	40.75	$7,500
TABRX	Templeton BRIC	270	18.51	$5,000
FSESX	Fidelity Select Energy Services	75	99.81	$7,500
VWEHX	Vanguard High Yield Corporate	1718	5.82	$10,000
Total ($):				$100,000

As you can see, there is higher allocation to financials since I believe that financials are at same stage as what tech was in 2002 and after some consolidation will have a good 2nd half of 2008

Disclaimer: I may have position in some of the stocks and mutual funds mentioned in the writing

Good luck and good night !

/Shyam