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. (more…)
Archive for January, 2012
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 on January 26, 2012 | 5 Comments »
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 on January 23, 2012 | 2 Comments »
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? (more…)
Posted in Bonds, debt, Dividends, Global Investing, Income Investing, Investors, Uncategorized, Volatility, tagged AA, AAA, bonds, downgrade, economy, France, income, S&P, yield on January 18, 2012 | 1 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 (more…)
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 on January 11, 2012 | 5 Comments »
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 (more…)
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 on January 9, 2012 | 2 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 (more…)
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 on January 5, 2012 | 3 Comments »
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 (more…)