Monday, October 27, 2008

Itching to Gamble, Itching to Invest

My girlfriends and I went on a girls' night out at a local Indian Casino couple Fridays ago. It was a pretty frugal event since my dinner was comp'd by my high-roller friend and I didn't gamble.

Just so you know, it was tough for me not to gamble. I LOVE to gamble. I love the electrifying atmosphere of the casino. I love the electronic sounds of slot machines. I love the sound of poker chips clacking together. I love faking out my poker competition by pretending to be a shy, novice player. (My cover is usually blown when I start trash-talking after winning a pot. Note to Self: Must learn to maintain poker face!) :-P


In addition to the casino, I've been sidelined in the stock market. I haven't invested in the stock market separately from my 401k and my ESOP since my priority right now is to bolster my emergency fund. But I'm DYING to divert some of the my savings into the stock market right now.

Now keep in mind, I've given up on investing in individual stocks. (Exception: I continue to invest in my company stock but only because my employer matches 30% for every dollar I invest.) As a non-professional market trader, I don't have time to valuate stocks by monitoring its fundamentals like P/E ratio, PEG ratio, ROI, ROE, cashflow, etc. I've instead decided a while back that I'm better off investing in a basket of diversified index funds.

If there's anything I've learned in this financial crisis, it's that my 401k alone is an insufficient means to prepare for retirement. One of the reasons is because my 401k doesn't have very good selection of funds. So I'd like to diversify my investments a bit more in my Roth IRA or in my investment account.

For example, I'd really like to diversify my portfolio by investing in:

Emerging MarketsVWO-61.23%
Health CareVHT-27.07%
Natural ResourcesIGE-46.7%

I truly believe that don't know whether these funds are seriously undervalued now and I don't know whether or how soon these funds will rebound. But I am firmly in Warren Buffet's camp. As Warren Buffett wrote: "I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: 'Put your mouth where your money was.' Today my money and my mouth both say equities."

The problem, though, is that as John Maynard Keynes once said: "The market can stay irrational longer than you can stay solvent." With a meager emergency fund, can I afford to take the risk? Unfortunately not. So I'm going to sit this prime buying opportunity out right now. And it's KILLING ME!

I need to keep reminding myself that cost is not a primary reason to buy anything, including stocks and homes. Cost is an element of affordability. If I can't afford it, it really doesn't matter if something is sold at a serious discount, right?


Sallie's Niece said...

I hate to gamble, even the penny machines! I somehow always lose anyway - maybe that's why. As for the stock market, I have never had the stomach for investing but it does seem like something that if you could afford to get into it right now could pay off in the future.

Sallie's Niece said...

Also that is the cutest lolcat!

Shtinkykat said...

Ha. I've discovered that the penny machine really isn't a penny machine if you play various lines at once. One draw could cost as much as a buck!