Tag Archives: Burton Malkiel

Falling ETF Fees and What They Mean

Vanguard has just reduced the expense ratios of 24 of its ETFs.  The reductions are fairly substantial.  What I noticed, in particular, is that the reductions include sector-specific ETFs.

The Vanguard Energy ETF (VDE), the Vanguard Information Technology ETF (VGT), the Vanguard Telecom ETF (VOX), and the Vanguard Utility ETF (VPU) each now have 0.14% expense ratios vs. 0.19% previously.  While the expense ratios of these funds were already low, the new expenses are 26% lower than before. Continue reading

Do We Live in the Golden Age of Investing?

Guest post by Contributing Editor, Matthew Amster-Burton, Mint.com.

Do we live in the golden age of investing?

Moronic question, right? Of course we don’t. The S&P 500 sits at about the same level it did five years ago. Bond interest rates have never been lower, and the Fed says it’s planning to keep them that way through mid-2015.

Turn on any financial channel and you’ll find as many gloomy predictions as you care to sit through: debt-fueled implosion in Europe, the next flash crash, the shrinking dollar, a stagnant labor market, Great Depression 2.0 (or is it 3.0 by now?). Continue reading

The Golden Rule of Investing

Guest post by Contributing Editor, Lowell Herr, ITA Wealth Management. Lowell is a subscriber to the Portfolioist and his investment philosophy is similar to ours.  Enjoy.

The Golden Rule of Investing is simply, “Save as much as you can as early as you can.” The operative word is early. William J. Bernstein lays it out in stark language in his book, “The Investor’s Manifesto“ when he writes, “Each dollar you do not save at 25 will mean two inflation-adjusted dollars that you will need to save if you start at age 35, four if you begin at 45, and eight if you start at 55. In practice, if you lack substantial savings at 45, you are in serious trouble. Since a 25-year-old should be saving at least 10 percent of his or her salary, this means that a 45-year-old will need to save nearly half of his or her salary. Most 45-year-olds will find this nearly impossible, if for no other reason than the necessity of paying living expenses, payroll taxes, and income taxes.” Continue reading

Dr. Andrew Lo: ‘Buy and Hold’ Does Not Work Anymore

Dr. Andrew Lo is a thought leader in the world of portfolio management.

The MIT/Sloan School of Management professor and Director of MIT’s Laboratory for Financial Engineering has been widely quoted on the implications of the 2008 financial crisis. One theme that Dr. Lo emphasizes repeatedly is that the risks associated with different asset classes can vary dramatically over time and for this reason, risk must be tracked, forecasted and budgeted.

In a world in which the risk of any given asset class (and therefore, also the risk of any portfolio of asset classes) can change dramatically in a short period of time, a passive buy-and-hold approach may, in fact, result in unacceptable levels of volatility. Continue reading

Dividend Stocks vs. Bonds: Are They Worth the Risk?

One of the recurring themes in the financial press in recent years is a warning to income-oriented investors not to pile into dividend-paying stocks to boost portfolio income. The Wall Street Journal has a recent article on this topic titled, “Why Dividend Stocks Aren’t the New Bonds.”  This article is motivated by the fact that $17 billion flowed into equity-income funds in 2010 even as $80 billion flowed out of U.S. equity funds. 

 The arguments made by the WSJ article are similar to those in a November 2011 blog post by Vanguard’s Chief Economist, Continue reading

Can You Create a 7% Yield Portfolio Focusing on Munis and Dividend Stocks?

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

Standing at the Close of 2011

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.

Many Happy Returns?

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