With all the sizzle and excitement in the stock market, bonds don’t always get the respect they deserve from individual investors. After all, how can you get excited over returns of 5% or 6% in bonds when you can have profitable periods of 25%-plus in stocks? It’s easy: when stocks hit their inevitable down periods, bonds can prop up a […]
A legendary manager of hedge funds warns investors away
When Michael Steinhardt tells you not to invest in hedge funds, you had better take notice. Steinhardt left the hedge fund business in 1995 after running one of the most successful funds ever. He wrote a recent guest editorial in The New York Times excoriating the industry’s marketing and warning most investors to avoid such funds. “As recent history shows, the outsized […]
Want high fund returns? Cut your costs
Mutual fund investors can improve their returns by focusing on the costs of running individual funds, says former Vanguard Investments Chairman John C. Bogle. “Costs clearly differentiate the superior performers from the inferior performers,” he writes. Bogle showed that costs matter in his newest book, “The Battle for the Soul of Capitalism” (Yale University Press, 2006). He did a study […]
The baby boom retirement wave may not punish the stock market
The largest generation in U.S. history is getting ready to retire, prompting dire predictions of a stock market bust. Some market observers worry that baby boomers will sell off large amounts of financial assets to fund their retirements, while smaller generations that follow the boomers will not be able to purchase those assets. The scariest predictions say the sell-off will […]
Buy and hold the indexes if you want to beat average investors
There are three truisms that keep finding new confirmation and that investors should ignore at their own risk: Buy and hold the market, don’t try to beat it. Index fund investors will beat most other investors. Stodgy value stocks usually beat sexy growth stocks. Two new real-world studies covering the U.S.market since 1957 dramatically illustrate these points. In one, the […]
Client Letter – Q2 2006
During the last quarter, investors experienced a lot of volatility in the markets. Although the markets recovered considerably by the end of the quarter, most diversified portfolios are still down slightly for the quarter (but remain positive for the year). Fortunately, the last 2-3 years have had such strong returns (for internationally diversified portfolios) that you may have started to […]
How to avoid seven big cognitive biases
Human beings seem to come ready-equipped with cognitive biases related to their perceptual equipment and adaptations to the world throughout evolution. Investors who want to do better in the markets and feel better about what they are doing must learn to recognize these states of mind. Here is a summary of the major biases covered in previous articles in this […]
Inflation creates a ‘money illusion’
Inflation is one of the hardest concepts for an investor to internalize. We tend to think naturally in nominal prices—that is, the price on the sales sticker—rather than the inflation adjusted price. For instance, which “feels” like the cheaper one-pound loaf of white bread—the one that cost 51 cents in October 1980, or the one that cost $1.04 in October […]
Client Letter – Q1 2006
I have some very important news to share. I recently purchased a property in the Town Center district of Macungie (just south of Allentown), and I am almost finished renovating this two-story Colonial home (originally built in 1936). I am planning to move Keystone Financial Planning to its “new home” on April 24th, assuming that everything goes as planned. I […]
Best mutual funds operated cheaply and invest passively
Expenses and investment style matter to investors looking for the highest gains on stock mutual funds, according to a recent survey by Investment News. Dimensional Fund Advisors (DFA) of Santa Monica, California, turned in the best overall stock mutual fund performance among its peer group of the largest 25 mutual fund companies, the trade publication reported. Investment News weighted the returns of individual […]
