I was amused to read last week in the 7/10/06 issue of Barron’s that Ben Stein and I have the same portfolios. We independently arrived upon very similar approaches, though it doesn’t mean much, especially since I’m not familiar with his investment philosophy or performance.

Still, you always get a little tickled if someone famous (and that accomplished, if a bit goofy) agrees with you. He claims, as I do, that he has neither the interest or temperament to invest other people’s money, and that if he ever lost a widow’s money, he’d “probably leave the country or jump off a tall building.” I’d probably do the same.

In the article, Stein advocated creating a so-called fund of funds by using ETFs and index funds, and hedging not with short plays but with cash. Maybe this isn’t that uncommon a strategy, but it turns out that we’ve picked the exact same ones in which to invest, sans Utilities (XLU) and Natural Resources (IGE). (I did own XLE briefly last year but sold it out of being conservative and trying to limit my investments in things I don’t understand. Like oil.) In the interest of full disclosure, I’ll state here that I currently own shares of EEM, EFA, and VTI, and IWN (as Ben recommends). I also have tiny holdings in EWO and EWJ (see below).

So let’s say you decide to invest in an ETF. What is it, and what should you look for?

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A couple of days ago, I decided to “invest-by-putting-a-toe-in-the-water” and bought some shares of Loomis Sayles Bond Fund (retail class, symbol LSBRX). To be honest with you, investing in bonds and bond funds are still a mystery to me, despite knowing how bonds work in theory.

Unless you have plenty of money (and time) to invest, buying individual bonds can be tricky. Instead, in order to obtain diversification within bonds, most investors choose to buy bond funds. As a complete newbie to bond investing, I definitely fell into this category. The purpose of many bond funds is to provide current income (in the form of dividend payouts), though some also aim for capital appreciation. The prospectus for LSBRX stated that it had both of these goals in mind.

Here’s the process I went through in deciding whether or not to invest in LSBRX:

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Welcome to this week’s Carnival of Investing! We had several entries this week, which I’ve grouped into the categories below. (If you’re a contributor and would rather your article appear in a different category, feel free to let me know.)

Thank you to everyone who submitted a post. If your post did not appear, either I didn’t receive it, or it wasn’t directly related to investing. Next week’s carnival will be hosted by Free Money Finance. To learn about hosting, submission requirements, or to peruse archives, be sure to visit the Carnival of Investing’s home at MyMoneyBlog.

Enjoy!

Stocks and Bonds

My 1st Million at 33 has written a very nice introduction to investing in natural resources.

Stock Market Beat goes through a detailed example of accounts receivables monitoring related to Par Pharmaceutical’s earnings restatement.

JeffSHoward explains the drawbacks and benefits of buying individual bonds vs. bond funds.

InvestorGeeks teaches us the process he went through to hunt and find a tenbagger in the form of AERT.

The Daily Bacon presents an elegant, chart-filled discussion comparing the volatility of small-cap against larger-cap stocks, along with some explanations of their drivers.

Financial Options summarizes financial events, earnings, and news releases coming up this week.

Trader’s Narrative asks if having an unusually high ratio of gainers to decliners marks an upcoming bull run.

Real Estate

“D”igital Breakfast has written a very informative post about what you can do if your house is in foreclosure.

Debt Free presents the benefits and considerations you must face when deciding whether to pay your mortgage off early.

It’s Just Money asks how accurate is Zillow?

Journey to Financial Freedom shares 3 formulas for investment success in real estate.

Foreign Investments

China Law Blog is highly skeptical of China’s new accounting laws, and tells us why, point-by-point.

Nubricks Property Blog highlights Bulgaria as a potential place to invest in property.

Frugal Wisdom from Wenchypoo’s Warehouse talks about some regions in the world that might make for good investment in the future.

General Investment Advice

Thinking About Money speculates on the future of the dollar and its economic impact should it fall.

Investing the Middle Way discusses portfolio rebalancing in his continuing series on asset allocation.

Abnormal Returns discusses the potential benefits from investing in funds run by privately-held firms as mentioned in two recent publications.

My Money Blog reviews the book All About Asset Allocation.

Get Rich Slowly reviews the book Rule #1 by Phil Town.

Free Money Finance discusses how much of your 401(k) should be invested in your company stock.

Pragmatic Finance reminds us the benefits of starting to invest early with a Roth IRA.

Blueprint for Financial Prosperity reminds us it’s better to be conservative than wrong when it comes to bubbles.

Young and Broke discusses financial phobia.

Daily Dose of Optimism wonders what recent, ironic posts in the media mean for the commodities market.

Investing World Today describes the basic steps of investing and money.

Tick Marks tells us that day traders are still around.

This week’s Barrons (dated 7/3/2006) featured an article about PowerShares ETFs in an article entitled “The Odd Couple” (subscription required). Personally, I’ve found ETFs to be a better solution than mutual funds for my investment objectives, but the article pointed out that “ETF assets have more than tripled over the past 4 years to $469B [and] there are more than 212 offerings…expected to grow at an average annual pace of 33%”. Nonetheless, the mutual fund industry is still a much bigger whopper at $9.5 trillion, so I suppose there’s still plenty of room out there for ETFs to grow.

I’d never heard of PowerShares ETFs, which offer a way to invest in extremely specialized industries (such as varieties of clean energy). But I was pretty shocked to read in the article that “Unlike most ETFs, PowerShares fund components are reshuffled quarterly in order to reflect best-in-show stocks within each sector.”

I had to look into this further. I’m not averse to trying out different investment methods (just look at the title of this site), but I couldn’t fathom the point of owning an ETF whose holdings changed every quarter. Not only that, but the problem with funds with high turnover rates is that they tend to go hand-in-hand with higher taxes, since usually whenever an asset is sold, a taxable event occurs.

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My favorite post from this week’s Carnival of Capitalists comes from View from a Height in an article entitled “The Morningstar Empire Strikes Back…”.

That’s right, some research the author helped on that investigated Morningstar’s classification system has gotten a response from the company itself. Statistical proof, going against the mainstream, I love it. (Of course, that their findings fit with my recent post on obfuscation in finance and business terminology doesn’t hurt, either!)

Both articles are worth reading, and they make cogent arguments as to why a commonly used classification system may not be all that great.