In “Close Encounters with the Market Timers,” I discussed why having your portfolio managed actively may have serious consequences on your returns in the long run. As mentioned previously, actively managed funds generally fail to beat their target benchmarks over long periods of time. There are many reasons for this, but the principal reasons are high fees and costs. These […]
The Curve Ball
Market expectations about interest rates change because of news. This makes it very difficult to build a coherent investment strategy around a forecast. In a recent article, Bloomberg News noted that the rally in the US Treasury market in 2014 was stronger than every economist surveyed by its journalists had predicted.1 US 10-year yields were around 2.3% at the end […]
Social Security: Timing Matters
A few weeks ago Chris recommended that I read a new book, “Social Security Strategies”, to better understand some of the strategies that clients can use to get the most out of Social Security over their lifetimes. As the name implies, the authors lay out different strategies on when to begin Social Security benefits based on profiles of an individual […]
How to Avoid the Next Madoff (especially if you work with a financial advisor)
Over five years ago, Bernard Madoff was sentenced to 150 years in prison for scamming many investors–both novice and expert–out of billions of dollars. It surprised me that so many experienced investors could fall for his lies and believe that his consistent returns were legit. Many of Madoff’s victims were clients of financial advisors, who had foolishly invested their clients’ funds with Madoff. […]
Over the Hedge
A recent press article said that with major risk assets looking “fully valued,” it was time to seek out alternative investments such as hedge funds. But those thinking of making that shift might want to look before they leap. According to consulting firm McKinsey and Co, hedge funds and other “alternative” investments will command up to 40% of the asset […]
The Certainty Principle
A frequent complaint from would-be investors is that “uncertainty” is what keeps them out of the financial markets. “I’ll stay in cash until the direction becomes clearer,” they will say. So when has there ever been total clarity? Alternatively, people who are already in the market after a strong rally, as we have seen in recent years, nervously eye media […]
Client Letter – Q2 2014
During the past quarter, REITs performed exceptionally well, with emerging markets stocks coming in with respectable returns also. The U.S. and international markets delivered positive returns in all asset classes. The following chart shows the 3-month, 5-year, and 10-year performance of many DFA funds (representing different asset classes) compared to the S&P 500 Index: Market Returns for the period ending […]
Seven Ways to Fool Yourself
The philosopher Ludwig Wittgenstein once said that nothing is as difficult for people as not deceiving themselves. But while most self-delusions are relatively costless, those relating to investment can come with a hefty price tag. We delude ourselves for a number of reasons, but one of the principal causes is a need to protect our own egos. So we look […]
Don’t put your retirement in jeopardy over college expenses
Middle-aged parents face two huge expenses: college costs for their children and the even larger eventual cost of retirement. Many find it hard to juggle the two and get confused over priorities and where to allocate resources. A recent Gallup survey done for Sallie Mae, the large student lender, found that 6 percent of parents in 2010 had withdrawn money from an […]
Want to retire but cannot control the markets? Save more
The old saying about not worrying about things we can’t control and concentrating on those things we can control applies to retirement planning, says Vanguard, the large mutual fund company. It conducted a study of market returns, savings rates, and investment horizons as they relate to retirement success. It found that savings rates are very important. “Our conclusions reinforce that the […]
