The recently-published book by Zvi Bodie and Rachelle Taqqu, Risk Less and Prosper: Your Guide to Safer Investing, provides a unique perspective on how to meet the challenge of long-term financial planning. The book is well-organized into a number of steps required for identifying and organizing long-term goals and thinking through how to meet these goals. The presentation is built around a narrative in which a group of people meet to try to figure out how to meet their long-term goals and how to deal with the uncertainty associated with both their lives and their investments. Continue Reading »
Posted in Asset Allocation, Behavioral Finance, book review, Books, Diversification, financial planning, Long-term investing, Low Cost Investing, Rebalancing, Regular Investing, Retirement, retirement income, retirement planning, Stock Investing, Uncategorized, Volatility | Tagged bonds, Risk Less and Prosper, TIPS, Worry Free Investing, ZVI Bodie | Leave a Comment »
Guest Blog from Quicken.com.
Only one thing always happens in the financial markets: Values fluctuate. Before investing in any market, at any price, in any climate, prudent investors think about how much fluctuation they can handle. In other words, how much can your portfolio go down before you start to lose sleep?
We all have our trigger points. After the stock market began skidding in October 2007, frayed nerves sent investors scrambling for havens they hoped were less risky. Then the market reversed course. Strong gains in much of 2009 left risk-averse investors on the sidelines, watching stock prices climb and wondering when, if ever, they’d have the stomach to invest in stocks again.
The lesson? Continue Reading »
Posted in 401(k), Diversification, financial planning, Income Investing, Investors, Long-term investing, Market Outlook, Market Timing, Markets, pension plans, pensions, Retirement, retirement income, retirement planning, Risk, Uncategorized, Volatility | Tagged quicken, retirement planning | Leave a Comment »
Standard and Poor’s downgraded France’s credit rating last week from AAA to AA+. While this downgrade has gotten a lot of press coverage, there are a number of topics surrounding the downgrade that are worth noting.
First, France now has the same credit rating from S&P as the United States. As you’ll remember, S&P downgraded U.S. sovereign debt from AAA to AA+ back in August 2011. Second, the yield on France’s 10-year bonds is at 3.08%. While this yield is well above the U.S. 10-year Treasury yield of 1.9%, it is certainly not a sign that the bond market sees substantial credit or interest rate risk associated with France. The media response to the downgrade is reminiscent of the situation in July last year when there was a media frenzy surrounding the possibility that the U.S. would fail to raise the debt ceiling and technically default on its debts.
Third, we can better understand the markets for debt (bonds) if we also look at the markets for equity (stocks). They are related. The appetite of investors for risk (and that of the market as a whole) varies through time. When investors are broadly risk averse, they are less willing to Continue Reading »
Posted in Bonds, debt, Dividends, Global Investing, Income Investing, Investors, Uncategorized, Volatility | Tagged AA, AAA, bonds, downgrade, economy, France, income, S&P, yield | Leave a Comment »
In “Can You Get 7% Per Year in Income with Only Moderate Risk?” a blog I wrote back in the beginning of December, I analyzed a portfolio with 7% yield and “moderate” risk. My analysis suggested that it was possible to create a portfolio with 7% yield and about the same level of risk as a portfolio allocated 50% to a total market stock index (VTI) and 50% to a broad bond index (BND). My analysis also suggested that this portfolio had a projected volatility of 15% on a going forward basis. A helpful reader (see his comments by clicking on the article above and scrolling to the bottom of the page) found that this portfolio lost Continue Reading »
Posted in Active Investing, Dividends, financial planning, Leverage, Long-term investing, Uncategorized, Volatility, Wealth | Tagged bonds, Burton Malkiel, closed end funds, Income Investing, MLP, Munis, Target Date Funds, VIX Index | 3 Comments »
Guest Blog by Kip Robbins, CFA, Zacks.com.
Having worked in the equity markets for awhile now with a primary focus on finding profitable stock-picking strategies, I sometimes feel like the keeper of great stock picking ideas. That being said, as the New Year is upon us, I’m in a giving mood and would like to gift you three great ways to pick stocks in 2012.
In the previous two articles I’ve posted here, you’ll remember that I discussed the merits of Research Wizard as an essential stock picking tool for the individual investor to create and test new ideas. So today, I’m going to give you an example of how to develop a stock-picking strategy within the Research Wizard using three specific strategies:
First, it’s very important to start with a good ranking or rating system. Most of the time, there’s a lot of research already committed to a rating and starting with a good working foundation is a great way for you to save time. (Examples of these are broker stock ratings or the Zacks Rank. I’ll use the Zacks Rank since it’s more comprehensive than broker ratings and also has a great track record for selecting stocks.)
Second, look for stocks that Continue Reading »
Posted in Investors, Long-term investing, Low Cost Investing, Market Outlook, Portfolio Investing 101, Risk, Stock Investing, Uncategorized | Tagged asset allocation, Income Investing, stock investing, stocks, volatility | Leave a Comment »
Guest blog by Daniel Solin, Mint.com.
The evidence showing that most individual investors significantly underperform the market is compelling. A study done by Dalbar, a leading financial services market research firm, found that, during the 20 years from 1991 through 2010, the average stock fund investor earned returns of only 3.83% per year, while the S&P 500 returned 9.14%.
The ramifications of this study are startling. It’s very easy to capture the returns of the market. All you have to do is purchase index funds that track the returns you are seeking to replicate. You will pay low transaction fees, but your returns should be pretty much in line with the indexes.
There is overwhelming support for buying Continue Reading »
Posted in 401(k), Active Investing, Asset Allocation, Behavioral Finance, Books, Diversification, ETFs, Financial Advisors, financial planning, Income Investing, Investors, Long-term investing, Markets, Mutual Funds, Personalization, retirement income, Risk, Uncategorized | Tagged asset allocation, Behavioral Finance, Daniel Kahneman, David Swensen, Fees, investing, management fees, mutual funds, rebalancing, retirement planning, volatility | Leave a Comment »
This has been a chaotic year in the financial world. In this latest article, I will take a look at what happened in 2011 and give my personal views on where things are going for 2012.
The biggest news of the year would have to be Europe. As I write this, the EAFE index of international developed-market stocks has returned -12% for the trailing 1-year period and an annualized -4.7% per year over the last five years. The EAFE index has a 15-year annualized return of 3.3% per year.
The S&P 500 Index has delivered 2.8% for the trailing 1-year and stands at almost exactly 0% total annualized returns (including dividends) for the trailing three years. On the other hand, Continue Reading »
Posted in Active Investing, Asset Allocation, Bonds, Dividends, Uncategorized | Tagged diversification, volatility, asset allocation, Emerging Markets, Income Investing, dividends, Burton Malkiel, recession, Europe crisis | 1 Comment »
All of us at the Portfolioist would like to take this moment to wish you and your family a safe and happy holiday season.
We’ll be taking off the remainder of the week, but will be back online next week with a variety of articles that will look back on 2011 and help you prepare for 2012.
All the best–
Lauren Tivnan & Geoff Considine, Ph.D.
Posted in Uncategorized | Leave a Comment »
Guest Blog by Robert P. Seawright, CIO, Madison Avenue Securities.
On account of the success of Moneyball (both the book and the movie, nicely satirized here), baseball management is often compared to investment management, and with good reason. Moneyball focused on the 2002 season of the Oakland Athletics, a team with one of the smallest budgets in baseball. At the time, the A’s had lost three of their star players to free agency because they could not afford to keep them. A’s General Manager Billy Beane, armed with reams of performance and other statistical data, his interpretation of which was rejected by “traditional baseball men” (and also armed with three terrific young starting pitchers), assembled a team of seemingly undesirable players on the cheap that proceeded to win 103 games and the division title.
Unfortunately, much of the analysis of Moneyball from an investment perspective is focused upon the idea of looking for cheap assets and outwitting the opposition in trading for those assets. Continue Reading »
Posted in Uncategorized, Markets, Investors, Regular Investing, Rebalancing, Personalization, Long-term investing, Market Timing, Risk, Stock Investing, Active Investing, Market Outlook, retirement income, retirement planning | Tagged asset allocation, Behavioral Finance, diversification, MoneyBall, recency bias | 1 Comment »
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