Posted in Active Investing, Behavioral Finance, Investors, Market Timing, Media and the markets, Risk, Stock Investing, Volatility, tagged behavioral bias, cognative bias, Gambling, information asymmetry, luck, sports betting, vegas sports books on October 4, 2012 | 8 Comments »
Guest post by Contributing Editor, Robert P. Seawright, Chief Investment and Information Officer for Madison Avenue Securities.
When I was a kid I had a paper route. One of my customers was a barber who made book on the side. Shocking, I know. The giveaway was the group of guys always hanging around but not getting their hair cut and the three telephones on the wall that rang a lot. Even as a kid I could tell that something was up. (more…)
Posted in 401(k), Active Investing, Asset Allocation, Bonds, Diversification, ETFs, financial planning, Income Investing, Investors, Long-term investing, Retirement, retirement income, retirement planning, Risk, Stock Investing, Volatility, Wealth, tagged Annuities, coupon payments, Fidelity, financial challenge, high yield bonds, Ibbotson, Inflation, junk bonds, MLPs, REITs, retirement income, SPIAs, SWRs, systematic withdrawal, Target Date Funds, TIPS, TIPS ladders on September 28, 2012 | 1 Comment »
During their working years, investors focus on saving and investing with a goal of building wealth. As they enter retirement, either by ceasing paid employment entirely or by scaling back paid employment, investors shift their focus to using their portfolios to provide a reliable long-term stream of income. This transition from building wealth to income generation is the subject of a great deal of research in retirement planning. Once investors are at or near retirement, the most significant financial challenge is using their accumulated savings to provide substantial income for their retirement years. (more…)
Posted in 401(k), Active Investing, Asset Allocation, Behavioral Finance, financial planning, Income Investing, Long-term investing, Portfolio Investing 101, Retirement, retirement income, retirement planning, tagged economy, Fidelity, Ibbotson, retirement savings, S&P 500, salary growth, stocks and bonds, Target Date Funds on September 24, 2012 | 5 Comments »
Fidelity just came out with a study that estimates that people will need about eight times their final salary level, assuming they work until age sixty seven, to be able to retire and subsequently to have 85% of their pre-retirement income provided from retirement savings plus social security. Fidelity also helpfully provides estimates of what they believe people need to have acquired at different ages. (more…)
Posted in Active Investing, Asset Allocation, Diversification, Dividends, financial planning, Personalization, Regular Investing, Risk, Stock Investing, Volatility, Wealth, tagged defensive stocks, Defensive Strategy Folio, Low-Beta, market volatility, Monte Carlo Simulation on September 19, 2012 | 4 Comments »
About four and a half years ago, Folio Investing launched an equity (e.g. stock) portfolio that focused on reducing the impact of market volatility. So-called defensive stocks are those which tend to be fairly insensitive to the mood of the market as a whole. Conventional wisdom suggests that demand for band-aids, electricity and paper does not go up when the market is exuberant, but neither does it collapse when the market swoons. The conventional wisdom also suggests that these stocks will tend to under-perform the broader market during rallies and, over the long-term, that a portfolio of these stocks will deliver modest returns. Our research suggested, however, that it was possible to create a portfolio of defensive stocks that would provide returns to keep up with rallies in the broader market, while still substantially reducing the impact of market volatility. Folio Investing launched the Defensive Strategy Folio that incorporated this research on February 28, 2008. (more…)
Posted in 401(k), Active Investing, Asset Allocation, Commodities, Financial Advisors, financial planning, Income Investing, Investors, Long-term investing, Personalization, Retirement, retirement income, retirement planning, Risk, Stock Investing, Volatility, Wealth, tagged Annuities, Are You A Stock or a Bond?, government bonds, Inflation, interest rates, low-risk, Moshe Milevsky, Rachel Taqqu, Risk Less and Prosper, TIPS, Treasury bonds, ZVI Bodie on September 17, 2012 | 9 Comments »
In Part I of this article, I explained why I have issues with the traditional idea that individuals should provide for their required level of retirement income (beyond what is provided by Social Security and any pensions) entirely with assets with zero risk of loss of principal (e.g. Treasury bonds). In Part II, I discuss the alternative approaches.
There are two investments that have zero loss of principal: traditional Treasury bonds and Treasury Inflation-Protected Securities (TIPS), which are Treasury bonds with embedded protection against inflation.
I agree with the notion that people need to save and invest so as to be able to provide a very reliable and consistent income stream in retirement. Zvi Bodie has presented a compelling argument that investments in stocks do not become less risky as you hold them for longer periods, so that investors cannot rely on stocks as part of their required income stream. I have performed detailed analysis of Bodie’s argument and I agree with his argument: the magnitude of loss that you can face with an equity-heavy portfolio increases the longer you hold the portfolio. As I noted in Part I, William Bernstein has recently advocated for a portfolio in which all of your required income is provided by Treasuries and annuities, largely consistent with Bodie. (more…)
Posted in 401(k), Active Investing, Asset Allocation, financial planning, Income Investing, Investors, Long-term investing, Retirement, retirement income, retirement planning, tagged business owners, individual 401(k), Individual Investors, IRA, plan administrator, Roth IRA, self-employed, SEP IRA on September 14, 2012 | 2 Comments »
Guest post by Contributing Editor, Matthew Amster-Burton, Mint.com.
Every once in a while, I receive a stack of paper in the mail from Vanguard addressed to “Plan Administrator,” which gives me an undeserved sense of self-importance.
No, I didn’t select “Plan Administrator” from a drop-down list of salutations that also included “Dr.,” “Lord,” and “Marquis”; I am actually the administrator of a 401(k) plan. The plan has one participant. Guess who? (more…)
Posted in Active Investing, Diversification, Dividends, financial planning, Investors, Long-term investing, Markets, Personalization, Regular Investing, Stock Investing, Volatility, Wealth, tagged Dow Jones Utilities index, folios, S&P500, S&P500 Index, sector watch, utilities on August 27, 2012 | 1 Comment »
Utility companies are expected to provide fairly stable performance, without too much downside risk. Utilities are also typically expected to provide lower average returns than the broader market. In the last decade, however, utilities have out-performed the broader stock market as investors have become increasingly risk-averse and worried about the prospects for sectors that depend largely on robust economic growth in order to meet their earnings targets. (more…)
Posted in 401(k), Active Investing, Asset Allocation, Bonds, Diversification, ETFs, financial planning, Income Investing, Long-term investing, Market Outlook, Retirement, retirement income, retirement planning, Risk, Stock Investing, Wealth, tagged baby boomers, equities, S&P 500, Target Date Folios, Target Date Funds on August 20, 2012 | 2 Comments »
One of the defining features of the last twenty years has been a persistent and fairly continuous belief that investing in the stock market was something of a sure road to wealth. The downturns in the stock market in the aftermath of the Tech bubble and, more recently, in the financial crisis, have shaken investors’ faith in the maxim that stocks are inevitably a good bet. The tendency of people to take it as an article of faith that equities will, ultimately, deliver high returns has been referred to as ‘the cult of equity.’ Two recent articles by experts that I respect propose that this phenomenon is dead or dying. (more…)
Posted in Active Investing, Behavioral Finance, Diversification, Dividends, financial planning, Investors, Long-term investing, Market Outlook, Market Timing, Markets, Passive Investing, Regular Investing, Retirement, retirement income, retirement planning, Stock Investing, Taxes, Uncategorized, Volatility, Wealth, tagged long term gain, long term loss, portfolio, short term gain, short term loss, Tax Loss Harvesting, Taxes on August 15, 2012 | 2 Comments »
Summer is winding down. And believe it or not, 2012 is more than half way over, which means it’s a good time for investors to start thinking about the year-end tax implications of their portfolios.
We invited Steve Thorpe, Founder of Pragmatic Portfolios, LLC to share some insights on Tax Loss Harvesting. Enjoy.
Would you invest a few hours to reduce this year’s taxes by $1,000 or more?
For investors with taxable investment accounts, this is often possible by taking advantage of tax loss harvesting (TLH). This perfectly legal strategy makes lemonade from lemons, allowing Uncle Sam to share part of the pain of the losses inevitably experienced by investors at some points during their investing career.
Between now and (more…)
Understanding your investing profile to achieve your financial goals starts with a few simple questions. The Investor Questionnaire, by Folio Investing, will help you understand your investment time horizon, investor profile and level of risk.
