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A Free Lunch for Investors

westloop — Mon, 01 Aug 2016 09:00:16 +0000

Nobel laureate Milton Friedman is generally credited with stating, “There’s no such thing as a free lunch.” Actually, if you know what you are doing, you can get a free lunch in investing. Unfortunately, most investors get stuck with very expensive meals.

Diversification is a free lunch

Diversification is a free lunch. It basically refers to the concept of not putting all your eggs in the same basket.

Read the rest of the article at The Huffington Post.

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Fama and Booth Weigh In On Brexit

westloop — Mon, 11 Jul 2016 09:00:35 +0000

When news of the Brexit vote broke, the financial media went into an overdrive of speculation bordering on hysteria. There was much talk about potentially devastating scenarios, including “turmoil“ to global markets.

One investment “pro” counseled investors against buying stocks because “the Brexit selling is not over.”

Read the rest of the article at The Huffington Post.

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A Culture That Encourages Misconduct?

westloop — Mon, 04 Jul 2016 09:00:20 +0000

When I started writing books about a decade ago, I took the position that no one should rely on a broker for financial advice. My reasoning was simple. I had never met a broker who recommended a globally diversified portfolio consisting solely of low-management-fee index funds, exchange-traded funds or passively managed funds. It was my view then and now that this is the only intelligent, responsible and evidence-based way to invest.

I also couldn’t understand (and still don’t) why anyone would entrust their life savings to brokers who don’t have an obligation to put the interest of their clients above their own. It made no sense to me that brokers are allowed to have undisclosed conflicts of interest they can resolve in their favor.

Read the rest of the article at The Huffington Post.

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An IRA With No Fees and No Risk

westloop — Mon, 20 Jun 2016 09:00:52 +0000

According to a recent poll conducted by The Associated Press-NORC Center for Public Affairs Research, two-thirds of Americans earning between $50,000 and $100,000 would find it difficult to come up with $1,000 to cover an emergency. For those earning less than $50,000 a year, that figure increases to 75 percent. A shocking 38 percent of those making more than $100,000 indicated they would have “some difficulty” raising $1,000.

This data is surprising to me because of the availability of defined benefit and defined contribution plans (for employees whose employers offer such options) and traditional IRAs and Roth IRAs, which are generally available to anyone earning an income.

Read the rest of the article at The Huffington Post.

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All Fiduciaries Aren’t Created Equal

westloop — Mon, 20 Jun 2016 09:00:39 +0000

Robo-advisors have had a significant — and generally positive — impact on the financial services industry. The term typically refers to services that use models and algorithms to invest client portfolios, often in exchange-traded funds (ETFs). A benefit much touted by some of these services is that there’s no interaction with a human advisor. The entire process is done online. Betterment and Wealthfront are the leading robo-advisors that fit into this category.

Lower fees

Because these robo-advisors are automated, they have significantly lower expenses than traditional investment advisors. Here’s Betterment’s fee schedule, which it offers through a wrap fee program:

Read the rest of the article at The Huffington Post.

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A Stock Tip That Went Horribly Wrong

westloop — Mon, 06 Jun 2016 09:00:34 +0000

Of all the misinformation disseminated to investors, the most pernicious supports the belief that some “investment pro” or pundit has the skill to reliably pick outperforming stocks. This myth is perpetuated by endless blogs and television appearances by “gurus” touting their latest and greatest stock selections.

A steady drumbeat

Read the rest of the article at The Huffington Post.

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Complexity Is the Investing Devil

westloop — Mon, 30 May 2016 09:00:50 +0000

What do the following investments have in common?

Options
Covered calls
Collateralized mortgage obligations
Non-traded REITs
Master limited partnerships
Variable annuities
Equity-indexed annuities
Hedge funds
Principal protected notes
Private equity

Here’s the answer: They are all complex investments. As a result, assessing the risks involved with owning these investments can be challenging. They also generate meaningful commissions for the brokers who sell them so enthusiastically.

Read the rest of the article at The Huffington Post.

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The Three Biggest Investing Anomalies

westloop — Mon, 30 May 2016 09:00:18 +0000

There are many anomalies in investing. It wasn’t easy to isolate the three biggest ones, but here are my choices:

1. You love Warren Buffett, but ignore his advice.

Warren Buffett has rightfully been called “the greatest investor of his generation, or ever.” Given his cult-like status, you’d think investors would hang on his every word.

Read the rest of the article at The Huffington Post.

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A Simple Strategy Your Broker Hopes You Won’t Learn

westloop — Mon, 23 May 2016 09:00:57 +0000

The data is irrefutable. There’s a direct correlation between low fees and higher expected returns. Two recent studies from Morningstar bring this point home in a powerful way.

The significance of low fees

Read the rest of the article at The Huffington Post.

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Rip-offs on a Massive Scale

westloop — Mon, 23 May 2016 09:00:29 +0000

Why settle for ruining the retirement dreams of one individual investor at a time when doing so on a massive scale is far more lucrative? That seems to be the strategy of some retirement plan sponsors, consultants, endowments and their advisors.

The dire state of retirement funds

An article in Zero Hedge describes this sordid scenario in chilling detail.

Read the rest of the article at The Huffington Post.

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