Technology Investor 

Harry Newton's In Search of The Perfect Investment Newton's In Search Of The Perfect Investment. Technology Investor.

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8:30 AM EST, Tuesday, April 10: "Get rid of my bonds." My comment yesterday unleashed a firestorm of reader comments. "You can't get rid of them. They're your insurance policy. What will you live on in your old age?"

A reader sent a piece by Professor Laurence J. Kotlikoff, professor of economics, Boston University, which included:

Stocks are Riskier the Longer You Hold Them.

Here’s why. The return to stocks basically follows what’s called a random walk. In other words, a stock’s future performance is independent of its past performance. Holding stocks is like throwing dice. What comes up in this throw bears no connection to what came up previously.
If you invested in stocks and they drop 20 percent this year, they have an equally good (but also very small) chance of dropping 20 percent next year, the year after the next year, the year. And just because you’ve lost for several years in a row doesn’t necessarily mean that things will turn around for you in the future.

In 2000, 2001, and 2002, for example, the U.S. stock market declined 9.1 percent, 11.9 percent, and 22.1 percent for a cumulative drop of almost 40 percent. So bad returns do happen and happen and happen some more.

I'm still mulling the bond question. Increasingly I think they're not useful. You can lose money on bonds, just like you can on stocks. In a time of rising interest rates (as now) bond prices are falling. The value of my bond portfolio (now 6.1% of my total assets) is declining. The longer I wait to sell them, the less they will be worth -- in six, nine or 12 months.

The BIG key to sanity is intelligent allocation. Everything you own should be appear to have a rosy future. You get rid of those parts of your portfolio which don't have appear to have a rosy future, and/or are performing badly. Bonds aren't today. End of story.

Meanwhile equities are doing pretty well. These are funds of various ilk (index, hedge, money manager, etc.) I've been in and largely still in. Comments below.

Mallette Capital was my worst performer for 2006. Fortunately I got out at the end of 2006. Their 2006 losses will wipe out all my ordinary income in 2006. Foolishly, I got out of Newgate. The problem was that I'd got in the middle of the year -- at their peak. So I lost money, though the fund was up for the year. Performance charts -- like the ones above assume you're with them all year. Performance numbers can be deceiving.

I keep pushing the Vanguard Australian Shares Index Fund which tracks the ASX 300 index. See above.

1 year to March 31, 2007
3 years to March 31, 2007 -- annual return
5 years to March 31, 2007 -- annual return
Vanguard Australian Shares Index Fund
Vanguard Australian Shares High Yield Fund

The joys of sex
Husband and wife in bed together.

She feels his hand rubbing her shoulder.

She: "Oh, that feels good."

His hand moves to her breast.

She: "Gee, honey, that feels wonderful."

His hand moves to her leg.

She: "Oh, honey, don't stop."

But he stops.

She: "Why did you stop?"

He: "I found the remote."

The joy of sex -- part 2
Defense Attorney: Will you please state your age?

Little Old Lady: I am 86 years old.

Defense Attorney: Will you tell us, in your own words, what happened the night of April 1st?

Little Old Lady: There I was, sitting there in my swing on my front porch on a warm spring evening, when a young man comes creeping up on the porch and sat down beside me.

Defense Attorney: Did you know him?

Little Old Lady: No, but he sure was friendly.

Defense Attorney: What happened after he sat down?

Little Old Lady: He started to rub my thigh.

Defense Attorney: Did you stop him?

Little Old Lady: No, I didn't stop him.

Defense Attorney: Why not?

Little Old Lady: It felt good. Nobody had done that since my Albert died some 30 years ago.

Defense Attorney: What happened next?

Little Old Lady: He began to rub my breasts.

Defense Attorney: Did you stop him then?

Little Old Lady: No, I did not stop him.

Defense Attorney: Why not?

Little Old Lady: His rubbing made me feel all alive and excited. I haven't felt that good in years!

Defense Attorney: What happened next?

Little Old Lady: Well, by then, I was feeling so "spicy" that I just laid down and told him "Take me, young man. Take me now!"

Defense Attorney: Did he take you?

Little Old Lady: Hell, no! He just yelled, "April Fool!" And that's when I shot him, the little bastard.

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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