April is financial literacy month. I believe that lack of financial knowledge is one of the most critical problems that our country faces. (more…)
Archive for the ‘financial planning’ Category
Financial Literacy: State of the Union in 2013
Posted in Bonds, Books, debt, Diversification, financial planning, Inflation, pensions, Portfolio Investing 101, Retirement, Stock Investing, tagged college costs, Fees, fiduciary resposibility, financial literacy, saving on April 18, 2013 | Leave a Comment »
Choosing and Paying for Higher Education
Posted in College Savings, debt, financial planning, tagged college affordability, cost of college, economy, higher education, recent graduates, unemployment on February 14, 2013 | 2 Comments »
I am now at an age at which many of my friends have kids preparing for, or going to, college. I have a few more years to figure out the details, but this is an issue that I have followed for a long time. My local in-state university, the University of Colorado at Boulder (CU), estimates the all-in cost of attendance at $26,000 per year. This varies a bit, based on which program you choose. Tuition, fees, and books cost about $14,000 per year (though this varies by program) and the estimated cost of room and board is about $12,000 per year. (more…)
Getting Help in Choosing and Managing a Portfolio
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…)
An Alternative Approach for Drawing Income from Your Portfolio
Posted in 401(k), Asset Allocation, Commodities, Diversification, financial planning, Investors, Retirement, retirement income, retirement planning, tagged 4% rule, IRAs, Monte Carlo Simulation, probability of failure, Quantext Portfolio Planner, TIPS, ZVI Bodie on November 23, 2012 | 1 Comment »
The question of how to safely generate income from a retirement portfolio is one of the most challenging in financial planning. In the days when people had traditional pensions, their employers simply promised them a constant inflation-adjusted income for the duration of their retirements. As we have moved away from traditional pensions and into self-directed savings plans such as 401(k)’s and IRA’s, investors and advisors must create their own customized income plans. New research from Morningstar highlights what appears to be a better approach to creating a stable income stream from an investment portfolio. (more…)
Managing Your Portfolio’s Exposure to Interest Rates
Posted in 401(k), Asset Allocation, Bonds, Diversification, financial planning, Investors, Long-term investing, Market Outlook, Retirement, retirement planning, Risk, tagged 10 year treasury bonds, Beta, bond yields, interest rates, QE, Quantitative Easing, REITs, Treasury bond yield, Treasury bonds, u s treasury bonds, Utility stocks on October 24, 2012 | 3 Comments »
Today, the yields on ten-year Treasury bonds are at a fifty-year low, and no period prior to the last few years reflects yields that even come close. From 1962 to 2005, the lowest the 10-year Treasury bond yield ever got to was just below 4%, more than twice the current yield.
The chart below shows how unusual our current environment is. The vertical axis is the yield from 10-year Treasury Bonds and the horizontal axis is time and we are looking at a period from 1962 to present. From 1980 to today, we have seen the yield of 10-year Treasury bonds go from about 12% per year to below 2%. The 10-year Treasury yield is considered a benchmark measure of bond yield and interest rates. The Fed funds rate and the 10-year bond yield are very closely tied to one another. For another illustration of how interest rates, the Fed funds rate and 10-year bond yield are related, see here. (more…)
Sector Watch: Retail REITs
Posted in Asset Allocation, Diversification, financial planning, Investors, Market Outlook, Risk, Stock Investing, tagged Apple stores, David Swensen, folios, mortgage reits, mortgage securities, Real Estate, real estate investment trusts, REITs, retail property, Retail REITs on October 12, 2012 | 2 Comments »
Real Estate Investment Trusts (REITs) are companies that own and, typically, manage real estate investments to generate income. REITs may also invest in mortgage securities (these are called mortgage REITs or mREITs). REITs may specialize in specific types of properties. The Folio Investing Retail REIT Folio holds equal-weight allocations to the largest publicly-listed REITs that own and manage shopping centers, outlet malls, and urban retail property. Retail stores lease space from the REITs and the leases are the primary source of income. (more…)
Unemployment: Part of the Economic Cycle or Secular Shift?
Posted in financial planning, Market Outlook, tagged american consumers, Bob Huebscher, China, economic recovery, economy, minimum wage, Mohamed El-Erian, outsourcing jobs, persistent unemployment, unemployment, unemployment levels, unemployment rates on October 8, 2012 | 1 Comment »
Bob Huebscher just published an outstanding article on the sustained high level of unemployment in the United States. The question that he seeks to address is whether we are in the recovery phase of a major recession or we are actually in the midst of a long-term shift in the economy. The article calls these two possible explanations ‘cyclical’ and ‘structural.’ It is worth understanding the key factors that have resulted in the current persistent unemployment levels in order to put the recent modest reduction in unemployment into context. Are we seeing signs of the long-awaited recovery that will bring us back to full employment or is the recent growth in employment simply variability around a long-term shift in the U.S. economy in which unemployment will remain well-above historical levels? (more…)
Sector Watch: Spotlight Telecommunications Stocks
Posted in Asset Allocation, Dividends, financial planning, Global Investing, Investors, Market Outlook, Stock Investing, tagged cell phones, France Telecom, FTE, global economy, industry, International Stocks, KKPNY, KPN, mobile phones, new media, S&P 500, stock indexes, technology, TEF, Telecom Folio, telecommunications, Telefonica on October 5, 2012 | 2 Comments »
The telecommunications industry is evolving quickly. Recent data suggests, for example, that half of all adults in the United States have a tablet or smartphone. There are many countries that have an average of more than one cell phone line per person. In the developing economies, cell phones have allowed much broader access to voice and data services than would have been possible if the traditional fixed-line infrastructure needed to be built. Ten years ago, Nigeria had only 100,000 phone lines. Today, Nigeria has 100 Million cell phone accounts. The ways that people use telecommunications are also expanding. For people with little or no access to banking, mobile money services can provide the essential roles of banking. The continued convergence of banking with telecommunications has substantial implications for both. (more…)
Saving and Investing for Retirement: Part Five
Posted in Asset Allocation, Bonds, Diversification, ETFs, financial planning, Investors, Long-term investing, Low Cost Investing, Mutual Funds, Portfolio Investing 101, Retirement, retirement income, retirement planning, Risk, Stock Investing, Volatility, Wealth, tagged Defined Contribution, economy, household income, income replacement, Lawrence Kotlikoff, pensions, retirement security, Rob Arnott, saving, Scott Burns, unemployment on October 2, 2012 | 2 Comments »
Effective Actions in an Uncertain World: Part Five of Our Special Five Part Series
There are a number of factors that we need to predict in order to come up with saving and investing strategies for retirement. The values that we assign to these factors will have a huge impact on whether or not we will be able to meet our goals. First, there is the expected return that investors will make on their retirement savings. Second, there is the common estimate that people will need about 85% of their pre-retirement income to support them once they stop working. Finally, there is the potential impact of behavior on savings rates, investing, and spending. (more…)
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