I have known Phil DeMuth for a number of years and I admire his common sense and views on many topics. Phil authored the recently-published book The Affluent Investor that fills a need in the crowded shelves of investment books. As a financial advisor to high-net-worth families, Phil brings valuable perspective to investors who have built substantial portfolios and seek to protect and grow their wealth effectively. (more…)
Archive for the ‘Financial Advisors’ Category
Posted in Asset Allocation, book review, Dividends, ETFs, Financial Advisors, Income Investing, Investors, Mutual Funds, Wealth, tagged affluent investors, high beta rich, high-net-worth families, investment portfolios, lifecycle investing, phil demuth, The Affluent Investor on April 9, 2013 | Leave a Comment »
Posted in 401(k), Asset Allocation, Diversification, Financial Advisors, financial planning, Investors, Long-term investing, Low Cost Investing, Portfolio Investing 101, retirement planning, Risk, tagged Target Date Funds, online brokers, IRAs, investment advice, self-directed investing, individual retirement accounts on December 20, 2012 | Leave a Comment »
There is currently $5 Trillion invested in Individual Retirement Accounts (IRAs), $4.7 Trillion invested in self-directed retirement plans provided by employers (401(k), 457, and 403(b) plans), and $2.3 Trillion invested in traditional pension plans offered by private companies. These numbers are stunning for a number of reasons. First, self-directed retirement plans (IRAs, 401(k)’s, etc.) dramatically dwarf the amounts invested in traditional pensions. This is part of a long-term trend, as employers move away from traditional pensions, but the magnitude of the shift is striking. With the assets in IRA’s surpassing the $5 Trillion mark earlier this year, the amount of money in individual accounts is moving ahead of employer-sponsored plans. What’s more, it is anticipated that IRA’s will continue to grow relative to employer-sponsored plans as people retire and roll their savings from their ex-employer’s plan into an IRA. This matters because investors in IRA’s have even less help in creating and maintaining their portfolios than investors in employer-sponsored plans. (more…)
Posted in Volatility, Retirement, Wealth, Investors, Personalization, Income Investing, Long-term investing, Risk, Stock Investing, Active Investing, Commodities, Financial Advisors, Asset Allocation, financial planning, 401(k), retirement income, retirement planning, tagged Annuities, Inflation, TIPS, Treasury bonds, government bonds, ZVI Bodie, Risk Less and Prosper, interest rates, low-risk, Rachel Taqqu, Moshe Milevsky, Are You A Stock or a Bond? 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 Retirement, Wealth, Investors, Personalization, Income Investing, Long-term investing, Bonds, Market Timing, Risk, Financial Advisors, Asset Allocation, financial planning, 401(k), retirement income, retirement planning, tagged Inflation, TIPS, Treasury bonds, government bonds, interest rates, low-risk on August 29, 2012 | 9 Comments »
Portfolio Income: The Trouble With Treasury Bonds
The current economic environment is making it very hard for investors to generate reasonable levels of income through traditional means such as bond ladders. While it is always dangerous to suggest that ‘it’s different this time,’ I believe that we are facing some unprecedented conditions that require new approaches. Income-seeking investors with low risk tolerance—those who have traditionally favored government bonds—are in the most difficult situation.
The problem of low savings and investment rates in the U.S. is huge. I have written about this in the past, along with many others. Every study on retirement savings notes that Americans need to save more. Having the ability to support yourself from a portfolio of savings is not, however, just about the amount that you save. There is also the issue of how much income you can derive from each dollar in your portfolio. Today, with historically low yields on government bonds, retirees and others seeking to live on the income from low-risk investments are faced with an enormous challenge that compounds the savings rate problem. To be able to live on the income provided by very low-risk investments, the necessary savings rates increase dramatically relative to savings rates when investors are willing to bear some risk. (more…)
Posted in Uncategorized, Wealth, Investors, Low Cost Investing, Personalization, Taxes, Income Investing, Long-term investing, Financial Advisors, financial planning, tagged Taxes, Tax Loss Harvesting, portfolio, short term gain, short term loss, long term gain, long term loss on August 24, 2012 | 1 Comment »
Here at the Portfolioist, we frequently turn to Steve Thorpe, founder of Pragmatic Portfolios, LLC to share his insights on the topic of Tax Loss Harvesting. Here are 5 of his Tax Loss Harvesting Tips to help keep more of your money when tax time rolls around.
It’s impossible to reliably predict future changes within the investment markets, however there are numerous ways for investors to favorably influence their own results. Important areas to focus on include developing an investment plan, saving regularly, diversifying widely, adhering to an appropriate asset allocation, and paying attention to all forms of costs – including taxes. For many investors, tax loss harvesting can improve their after-tax bottom line, sometimes to the tune of thousands of dollars per year. (more…)
Posted in Commodities, Financial Advisors, financial planning, Personalization, Risk, Uncategorized, Wealth, tagged Consumer, Consumer Confidence, financial products, financial services, sales on August 22, 2012 | 4 Comments »
Guest post by Contributing Editor, Robert P. Seawright, Chief Investment and Information Officer for Madison Avenue Securities.
Critics of the financial services industry (often with good reason) frequently remind consumers that financial products are typically “sold” rather than “bought” and implore them not to fall into that trap. The concept here is that financial products are “sold” — pushed upon a consuming public that doesn’t understand them or perhaps even want or need them. Instead, the alleged basis for their continued vibrancy and ongoing sales is that advisors get paid big bucks to sell them. (more…)
Posted in Uncategorized, Volatility, Markets, Retirement, Wealth, Investors, Diversification, Leverage, ETFs, Long-term investing, Market Timing, Market Outlook, Financial Advisors, Asset Allocation, financial planning, retirement income, retirement planning, tagged diversification, Target Date Funds, Target Date Folios, correlation on August 17, 2012 | 4 Comments »
Last week, I posted an article discussing how diversification is one of the most misunderstood concepts in investing. In today’s post I continue with the second half of this two-part series titled, “The Power of Effective Diversification.”
In Part I of this article, I discussed the difference between naive diversification (holding lots of stuff in a portfolio) and real diversification (combining assets in a portfolio to create risk offsets). I also showed how a well-diversified portfolio can maintain the ability to participate in market rallies while still mitigating risk. In Part II, we will explore what an effectively diversified portfolio looks like today. (more…)
Posted in Active Investing, Asset Allocation, Behavioral Finance, Diversification, Financial Advisors, financial planning, financial ratios, Investors, Long-term investing, Low Cost Investing, Market Timing, Markets, Regular Investing, Retirement, retirement income, retirement planning, Risk, Stock Investing, Uncategorized, Volatility, Wealth on August 13, 2012 | 2 Comments »
Guest post by Contributing Editor, Janet Al-Saad, Mint.com.
When it comes to financial wisdom, few people merit as much attention as Warren Buffett. The man renowned as the “Sage of Omaha” built a billion-dollar empire from scratch, all the while maintaining modest spending habits that are the envy of every frugal person everywhere. Liz Claman of the Fox Business Network spoke with Buffett recently, and shares some of his wisdom with Mint Life: (more…)
Posted in Active Investing, Asset Allocation, Bonds, debt, Diversification, Financial Advisors, financial planning, financial ratios, Income Investing, Inflation, Investors, Leverage, Long-term investing, Low Cost Investing, Market Outlook, Market Timing, Passive Investing, Rebalancing, Regular Investing, Retirement, Risk, Uncategorized, tagged LBTA, Low-Beta, low-beta stocks, S&P 500, S&P 500 Index on August 2, 2012 | 4 Comments »
Financial theory suggests that risk and return go hand-in-hand:
Small company stocks tend to be riskier and outperform large company stocks. Long-term bonds tend to be riskier and outperform short-term bonds. Corporate bonds tend to be riskier than Treasury bonds (with comparable terms) and outperform Treasuries over time.
However, there is one group of stocks that has consistently defied this risk/return relationship: Low-beta stocks. A low-beta strategy involves selecting stocks that have a lower-than-average beta value. (Beta is a measure of the stocks’ volatility and adding low-beta stocks to your portfolio can help investors build a diversified portfolio.) The good news for investors here is that (more…)