I have been hearing a lot about Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, by Helaine Olen. Without having read the book, it sounded like a muckraking survey of the ways that the financial services industry fleeces individuals. Commentators in the financial services industry have been broadly critical of the book. Larry Swedroe, a well-known advisor and journalist concludes that “problems are well exposed, but investors are left in the dark about how to deal with those issues. This book has many positive aspects, but in the end, it comes up short of helpful.” Morningstar’s John Rekenthaler comes to a similar conclusion in his review, suggesting that the book is entertaining and worth reading, but is somewhat biased in terms of telling Olen’s audience what they want to hear. The reviews and controversy inspired me to read the book myself, and it is a fairly quick and enjoyable read for those interested in the issue. Continue reading
One of the most-discussed issues in long-term investing is whether to focus on income generation or simply to think in term of total return (price gains plus income). The discussion of this topic often focuses on whether investors should seek out stocks that pay dividends vs. simply planning to sell a fraction of their portfolio periodically to provide income. I recently wrote a long article on this topic, which has been cited in a very interesting discussion of this theme going on at Bogleheads. One of the most active participants in the debate on the Bogleheads forum and elsewhere is Larry Swedroe, a well-known advisor and author. As I read the Bogleheads discussion thread, it strikes me that there is considerable confusion around this topic, so I thought I would add a few more thoughts. Continue reading
Recently we wrote a post about Tactical Asset Allocation and how tough it can be to execute effectively. That in turn set off a discussion of the lack of meaning in terms like “buy-and-hold” and “tactical asset allocation.” I was accused of setting up a false dichotomy. There are stocks that you buy and hold. You do that because they continue to do well, argued Roger Lowenstein. But you do have to be willing to let go of the ones that aren’t working.
Lowenstein believes in stock-picking, but if you don’t think that you have that skill, or if you want to balance a few such picks with a broader diversified approach, then you may indeed be interested in the passive v. allocation debate.
In a recent post on his Wise Investing blog, Larry Swedroe sought to better explain just what passive investing in. It is not “by and hold.” Passive investing is passive, but not pulse-less. Continue reading
In his latest Behavior Gap Newsletter, Carl Richards nails that feeling of confusion that comes when we learn first hand that “past performance is not a guarantee of future results.”
Investing isn’t like hiring a basketball coach, Richards argues, but rather like planting an oak tree: Continue reading
Well it’s that time of year again. That moment when we promise to start afresh and finally do the things we ought to do.
Grab that momentum/optimism/guilt and start your financial year on good footing.
To help, we reached out to some of the experts who’ve shared their insights with Portfolioist in 2010 and asked them a simple question: What would be the very best New Year’s resolution an investor could make moving into 2011? Continue reading
A few weeks ago, Mel Lindauer expressed his worry that the super-low yields offered by bonds these days have people considering questionable move: switching money out of bonds and into dividend-bearing stocks in a search of more income. “People look around and there’s nowhere to turn,” said Lindauer of the fixed income market. “I’m really concerned. I’m concerned that people are talking about possibly going into equities to get the 2.5% yield and forgetting about the risks in equities.”
Larry Swedroe added his voice to the chorus of concern in his MarketWatch column last week. High-dividend stock strategies “are poor substitutes for either a high-quality bond approach or [a] diversified stock approach,” Swedroe writes, Continue reading
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.
One recent Sunday afternoon Larry Swedroe set off a passionate debate on the Bogleheads board when he posted some thoughts about investing skill. Or more particularly its irrelevance.
Swedroe, an avowed proponent of passive investing, wanted to clarify his position. It’s not that investing skill can’t exist, he argued, it’s that if it does, the markets will, over time, erase that advantage. And, just as importantly, that it’s impossible to predict where that skill will show itself. We’re betting against the odds if we try to pick the winning investors (or fund managers). Continue reading