“Things are different this time. Markets can continue to go up, despite stock valuations that have no rational relation to corporate earnings.” That’s what some of the experts were saying early in 2000. By now it is hard to find anyone who has not had those notions pounded out of them by what almost became the second-worst bear market of this century. […]
Investments
Foreign investing adds vital diversification
Through the late 1990s American investors liked to stick close to home. They were well rewarded for doing so—the Standard & Poor’s 500 index returned 16.8% on average yearly, while the Morgan Stanley EAFE Index, a gauge of large foreign stocks, had an average annual return of just 8.8% per year. But that is history. It is time for rational […]
Indexing advantage is no longer debatable
Twenty-five years ago the concept of indexed investing was derided by professional investors as a path to mediocre investment returns. Why buy the market when you can beat the market? That was their argument. But one of the pioneers of retail mutual fund indexing, former Vanguard Group Chairman John C. Bogle, has had the last laugh. Index funds he launched […]
Market beaters may be just lucky
It all seems so easy: smart investment managers rise to the top. All an investor has to do is identify one of the geniuses who runs a portfolio that has been successful for a long period of time. By hitching his fortunes to that of the star investment manager, the investor will have a better chance of beating the stock […]
Turn losses into a valuable lesson
Did you lose money in stocks over the last 28 months? Don’t just fret over what’s happened; instead, learn some valuable lessons that will improve your future investment experience and returns. Bear markets like the one we’ve experienced are great teachers of basic investment lessons. Among them are: Diversification works. Investments return to the mean. You cannot outsmart the market. Safety in […]
Institutional mutual funds have an advantage
Many American investors by now are familiar with retail mutual funds. Popular names like Janus, Fidelity, and Vanguard are advertised widely and fill the portfolios of many investors. What many don’t know are their more refined cousins – institutional mutual funds. Where a retail mutual fund will take any investor who knocks on the door, an institutional fund accepts only […]
Shameless funds charge too much
Mutual funds are one of the most important innovations of all time for individual investors, allowing them to obtain wide diversification and professional investment management at reasonable cost. That makes it the more shameful that large portions of the mutual fund industry continue to exploit shareholders with excessive costs, while delivering below-average returns. Some fund companies offer very inexpensive products. […]
Financial con artists prey on greedy investors
Greedy investors and savers who seek low risk and unrealistic returns face big risks of being defrauded. As the stock market enters its third year of declines and former stock investors search for “safer” returns, it is likely that more fraudulent alternative investment schemes will pop up, state and federal securities regulators warn. The recently resurrected case of fraud at […]
Hidden warnings of danger in your 401k plan
The collapse of the Houston-based energy trading company Enron has demonstrated that a seemingly benign 401k retirement savings plan may be dangerous to your financial health. Enron’s collapse virtually wiped out the retirement savings of many employees whose 401k account balances were largely invested in the company’s stock. Individuals with accounts that were once worth hundreds of thousands of dollars […]
Does the market have to rise? Not really
There has been a lot of speculation in recent months that 2002 will be a good year for the stock market. Why? Because 2001 and 2000 were both losing years, and the market rarely has three losing years in a row, many pundits have argued. This argument is probably wrong on several counts. For one, the stock market’s current results […]
