Vote Earth!

A global election is taking place, between Earth and Global Warming. Your vote will contribute to a global mandate for action on climate change, to be presented to world leaders at the UN Climate Change Conference in Copenhagen, set on 16 December 2009. What's your vote?

"Because global warming is not about what country you're from, it's about what planet you're from."

Earth Hour 2009

Yesterday night, my friend and I observed the 2009 Earth Hour, from 20:30 till 21:30, Jakarta's time. Along with us, 83 countries the world over were participating, turning off lights for an hour to raise awareness of global warming.

In Jakarta, the local government committed to turn off the lights in 5 of the city's icons: the City Hall, the the National Monument, the fountain of Arjuna Wiwaha, the Youth Statue at Senayan, and the Welcoming Monument at Hotel Indonesia roundabout. I suppose you can guess where I was from the video?

And this is the scenery when all the lights were turned on again:

I know there are some of you out there questioning the purpose of such event, and if it could really curb climate change. Well, directly? It's not nearly enough.

The event was held to raise awareness for the public at large of efforts that can be done to stop global warming, and to raise their curiosity of climate change, its dangers, and measures to be taken to save the planet.

For the act was so simple, yet done en masse it would put a dent in the amount of carbon emitted in one day. Imagine the possibility of more complex, concerted, and conscious efforts could have done?

5 Themes of Asset Allocation

In continuation with my retirement portfolio building, I've been thinking of dividing the portfolio into five themes of asset allocation. I could have gotten away with only two of them (core equity and core debt), but where's the fun? The five themes are as follow:

1. Core Equity Holding - Geographic
• This theme will act as the core holding for equity in my portfolio. As mentioned in my previous post the other day, the maximum allocation for equity is 62%. As I get older, that allocation will decrease to reflect declining tolerance toward risky assets.
• It's based on geographical diversity to achieve the widest market coverage in fewer instruments.
• Due to its sizable holding, this theme will pretty much steer the direction and movement of the whole portfolio. Its allocation will be the first to be reduced for any addition beyond core equity and core debt.
  
2. Yield Producers and Cash Equivalent (a.k.a. Core Fixed Income/Debt Holding)
   
• This is the core holding for cash and debt instruments in my portfolio. In conjunction with the core equity holding, the allocation for these instruments should be 28% (remember, rule 90). Consequently, that allocation will increase as I get older to reflect increasing preference toward safer assets.
• This theme will act as the ballast for the whole portfolio. As such, it should give stability to the volatile movements found in other themes.
• As the "safest" holding, I'd rather leave its allocation alone after what had happened to my portfolio in 2008. I would consider its reduction only after taken into account the reduction I've made in the core equity allocation first.
  
3. Satellite Equity Holding - Sectoral
• The satellite equity holding is intended to enhance the expected return of the core equity holding. Its risk profile is higher due to its more concentrated holding and higher return expectancy.
• It is based on sectoral diversity to give the theme more flexibility for fine-tuning and re-balancing, while still maintaining its "spicy" sector bets.
  
• Obviously, allocation enlargement in this theme will reduce the 62% I've allocated in the core equity theme.
  
4. Alternative Assets
• Alternative asset will act as the main diversifier for the portfolio as a whole. This is because alternative asset is expected to have low correlation with the other themes in this portfolio.
• As the wild card, alternative assets are expected to work in conjunction with the other themes both as a return enhancer and a volatility stabilizer. By itself, alternative assets can be highly unpredictable.
• By far, this is the most difficult theme to assemble due to the limited instruments available for retail investors and my limited experience in this type of investment. It should be most interesting area to explore, albeit gradually.
  
5. Green Investments
• Green investments, in this case, are meant for socially responsible investment (SRI) instruments not falling into one of the other themes. As a rule, instruments chosen to represent the other themes, especially core equity and core debt, should be of SRI alternatives including shariah-compliant instruments. Once they're exhausted, further SRI consideration should be placed here.
  
• Depending on the weight of its instruments, this theme can be very volatile, even more than the satellite equity holding due to its extremely concentrated sectors.
  
• Allocation for the green investment include the 10% in philanthropy account. Thus, a 100% allocation for all the five themes can be made.
  

There you go, five themes for the retirement porfolio. Although it may be spread over different accounts, the retirement porfolio should adhere to these five themes, which can be a laborious effort. I didn't know of any easier way at this point, but I guess I have to make do with Excel for the time being.

iShares KLD 400 Social Index ETF (DSI)

[In light of my postings on my Facebook's FSX application, I'll also do the same here for my other portfolios (with real money as opposed to FSX's virtual money). Though I won't put the amount here, I'll still put the position I have or currently targeting. I do have several portfolios, though I am still undecided how to categorize them. For the moment, my postings will comment on the all ETF, multi-purpose, and taxable portfolio.]

iShares KLD 400 Social Index Fund (DSI) is an ETF that seeks to match the performance (price and yield) of the Domini 400 Social Index, which is the DSI's underlying index. The ETF holds 401 securities (as of July 27, 2008) and puts its 99.8% holdings fully invested in stocks. Average annual turnover is 4% and total net assets is USD 58.3 million. Its inception date was November 14, 2006 and has returned -5.61% (as of June 30, 2008) since then. For comparison, S&P 500 has performed by -5.15% during the same period (the market has been in a difficult period).

So, what makes the Domini 400 Social Index? The Index is a float-adjusted, market-capitalization weighted (much like S&P 500), common-stock index of US equities. The Index excludes companies with main businesses in tobacco, alcohol, firearm, gambling, military weaponry, and nuclear power plant. Also excluded are companies that have controversial issues on human rights, labor standards, diversity, accounting, and product quality. The Index puts positive screen on companies that have strong relationships with its stakeholders: communities, customers, ecosystems, employees, shareholders, and suppliers. As a result, the Index tends to overweight Information Technology sector (22% weighting as of June 30, 2008) and underweight Energy (6%) and Utilities (2%).

When selecting companies for the Index, KLD Research & Analytics, the Index maker, maintain the composition of the holdings to 250 companies under the S&P 500 Index, 100 additional large and mid cap companies for sector diversification, and 50 smaller companies with exemplary social, environmental, and governance records. Its five largest holdings (as of July 27, 2008) are Microsoft, Procter & Gamble, Johnson & Johnson, AT&T, and Apple.

With expense ratio of 0.5%, DSI is a viable alternative to mutual funds. And with Beta of 1 (to S&P 500), it is also a viable alternative to S&P 500 Index-tracking securities. Morningstar category for DSI is Large Blend (as of July 27, 2008). As such, I placed it under my core holdings, with target position of up to 20% of my portfolio (subject to change, but for the moment, that is the maximum position I put for large cap US equity portion). As an anchor, DSI fits the bill due to its diversified, large-cap tilt, US-based, market-cap weighted, low expense, low turnover, and especially being the only socially responsible instrument at the moment with all those characteristics.

Go Green, Live Rich: 50 Simple Ways to Save the Earth and Get Rich Trying by David Bach

Go Green, Live Rich: 50 Simple Ways to Save the Earth and Get Rich Trying by David Bach

My review

rating: 3 of 5 stars
David Bach is the writer of the popular Finish Rich series. I haven't read his other books, so I can't comment on the series yet.

In Go Green, Bach starts with a chapter on knowing your impact on the environment, opening up the setting for the whole book. For the next nine chapters, Bach outlines some fifty tips on changing your behaviors so not only you would save the planet, but also save up some cash in the process (much like what William McDonough advocates that being green equals being efficient equals saving money). Those cash, if invested at certain percentage of return, will bring pretty sum thanks to compounding effect. The fifty tips cover a whole gamut from transportation, housing, water use, food, recycling, work environment, to traveling among others. Almost all are relatively easy and not as time consuming as one would expect. It just a matter of getting it started, habit will continue the rest.

Of course it won't be an investing book, if there's no tips regarding personal investment. Well, in chapter 10, Finish Rich: Make Your First Green Million, Bach gives some ideas on investing green and starting your green business.

Lastly, a good quote from the book regardless whether you ends up living and investing green or not, "It is not what you earn that makes you rich or poor; it is what you spend."

View all my reviews.

Kehati Lestari Mutual Fund

In support to the Blog Action Day 2007, I'm writing about a new mutual fund which was just launched last July. That mutual fund is Reksa Dana Kehati Lestari. So, what is so special with this mutual fund? Well, the issue of this year's Blog Action Day is about the environment. Reksa Dana Kehati Lestari is the first socially responsible mutual fund in Indonesia focusing on the issue of environment sustainability. It is co-managed by a local investment company, Bahana TCW Investment Management, and an environmental foundation, Yayasan Keanekaragaman Hayati (Kehati Foundation).

The Kehati Foundation is a fund raising non-profit entity and its main mission is to facilitate local organizations and build their capacity to benefit from the natural resources and at the same time conserve the natural biodiversities. The Kehati Lestari mutual fund enables individual and institutional investors to participate in the philanthropic activities to benefit the foundation. Investors would be able to invest and donate at the same time, by allocating either their full investment, full return only, partial return only, or just the management fee, as streams of donations for the foundation as long as the investment is kept in the fund. This investment structure is called quasi-endowment fund, where investors still hold ownership to the investment principal, though they can also opt to donate the full principal as well in the full endowment scheme.

While quasi-endowment structure may not be uncommon in the western world, a mutual fund is probably the better vehicle, if not the only vehicle, for large number of Indonesian investors to invest and donate consecutively as the trust (the common vehicle in the west) law is virtually non-existent at the moment. Although one may argue that the law of waqf (religious endowment) may undergoing better progress and can substitute for the trust as the investment vehicle for this type of philanthropic needs.

I think this innovative product is suitable for a wide range of investors who want to support the environmental cause in a long-term and sustainable way. Investors may increase their participation level and switch their investment allocation to more generous options as their overall net worth grew and their wish to leave a legacy present itself. Moreover, institutional investors may claim their good act of corporate social responsibility (CSR) by investing in this mutual fund.

Yup, It Was A Quake

Indeed, it wasn't just me. The news confirmed that what I had experienced was indeed an earthquake. As I expected, the epicenter was relatively close at 110 km (about 70 miles) from Jakarta, specifically at 75 km (46 miles) northwest off the coast of Indramayu in West Java, at the depth of 286 km (178 miles). While it was quite devastating at 7.4 on the Richter scale magnitude, the fact that it was occurred deep under the ocean dampen its impact tremendously. No casualties and no significant material losses reported so far.

Since the quake occurred a day after Jakarta provincial election, there were comments made that it might be a bad omen for future administration of the governor-elect, Fauzi Bowo. I didn't vote during the election day since I wasn't registered due to the error in KPUD's (the commission for municipal election) part.

Was It A Quake?

Wow, I was about to finish up with my reading when I suddenly felt my room quietly moving. It was 0:11 Jakarta time if I remember correctly. It wasn't long, probably under a minute, but it was longer than the one I experienced in high school. This time I could actually felt it and it was if my room had been inside a ship. Hmm.. what was actually happened? The epicenter shouldn't have been far. It should be interesting to see what would be in the news in the morning. I still feel a bit dizzy, or was it just me all along...?

[break] Bioneers Conference

A little break from the Astrocenter Report. There is a conference here in Bloomington for the weekend, which I have attended today and plan to attend tomorrow and Sunday as well. The Bioneers conference for this year is held in San Rafael, California, but there are several satellite site (Bloomington is one of them), where people can watch it via streamed connection.

You can probably find out more about Bioneers from its website, but here's a bit about them. It's a program to promote conservation, environmental, and sustainability. They have various outreach programs such as radio series, book series, farming networks, and conferences (such as the one in Bloomington).