The S&P500 has recently been hitting new all-time highs, which would seem to suggest that the economy is recovering and that the U.S. economy is back on track. The story does not look quite so rosy when you account for inflation, as Mark Hulbert has recently noted. The current level of the S&P500 is, in fact, still about 24% below its high in 2000 once inflation is considered. Economists and finance people would say that, measured in real terms, the S&P500 is 24% lower than it was at its 2000 peak. What this means is that the proceeds from the sale of a share of an S&P500 index fund purchases considerably less in real goods today than it did thirteen years ago. (more…)
Posts Tagged ‘Index Funds’
Why Mutual Fund Managers May Not Act in Your Best Interest
Posted in Active Investing, Behavioral Finance, Diversification, Financial Advisors, financial planning, Market Timing, Markets, Mutual Funds, Retirement, Stock Investing, Uncategorized, tagged herding mentality, Index Funds, Jeremy Grantham, mutual fund managers on April 27, 2012 | 2 Comments »
Jeremy Grantham has produced yet another truly outstanding essay in GMO’s Quarterly Letter to Investors for April 2012. Never reluctant to take on controversy, he focuses on the ways in which mutual fund managers have strong incentives to behave in ways that are often not in the best interests of investors in their funds. In the academic world, these perverse incentives are referred to as “agency problems.”
A mutual fund manager makes decisions on behalf of his or her fund’s investors. In the parlance of economics, the manager acts as an agent working on behalf of the investors (the meaning here is similar to the use in the term real estate agent). (more…)
Retirement Solutions: Target Date Investing
Posted in Asset Allocation, Diversification, Retirement, tagged Commodities, DALBAR, diversification, ETFs, Financial Engines, Index Funds, mutual funds, precious metals, REITs, retirement, Risk, Target Date Folios, Target Date Funds, TIPS on February 23, 2011 | Leave a Comment »
Investors Have Lost Their Way
The aggregate performance numbers and evidence suggesting that most investors are holding inappropriate asset allocations foretell disaster for the investors who are relying on their 401(k) plans as the primary source of their retirement income.
There is little question that the average investor would benefit from some help in portfolio construction and maintenance. (more…)
Your Fund Manager is No Albert Pujols, and Other Lessons from Larry Swedroe’s Investing Tales
Posted in Books, Passive Investing, tagged 401k, Albert Pujols, Behavioral Finance, Christopher R. Blake, Edwin J. Elton, Fordham University, Index Funds, Larry Swedroe, Martin J. Gruber, New York University, Overconfidence, passive investing, Wise Investing Made Simpler on October 21, 2010 | 1 Comment »
Albert Pujols hits a home run against the Padres, May 19, 2008, photo: SD Dirk via Flickr
Corporate 401(k) plan sponsors pick bad funds for their plans, according to a 2006 study. Then the participants in the plans compound the problem, again picking funds headed for a fall.
Why? Because though the Securities and Exchange Commission mandates that funds put in any piece of marketing the disclaimer that past performance is not indicative of future results, it seems no one believes them.
In chapter 15 of his new book, Wise Investing Made Simpler, CBS MoneyWatch columnist Larry Swedroe acknowledges a logic to our apparent fiscal recklessness. (more…)
Smart Investors Aren’t So Smart
Posted in Behavioral Finance, tagged Behavioral Finance, Boglehead's Unite, Bogleheads, Dunning-Kruger effect, Index Funds, Morningstar, Paul Keck, Smart Investing on September 24, 2010 | 2 Comments »
Commentary by Paul Keck.
You might assume from reading the title that I’m saying investors aren’t as smart as they think. Not exactly. What I am saying is the smartest individual investors know they aren’t that smart.
They know they aren’t smart enough to:
- consistently beat the market after costs
- time things
- pick the best funds consistently
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