In spending significant time talking to clients and wealth advisors about fixed income, one common misconception is that bond funds are more exposed to interest rate risk than laddered individual bond portfolios. The logic basically starts and ends with the observation that individual bonds can be held to maturity while bond funds don’t necessarily hold…
One of the questions I am most asked goes something like this: “I have a large amount of cash to invest. Should I invest it all at once or spread the investment out over time?” Perhaps the cash comes from the sale of a business or an inheritance. Or the cash might build up over…
Public pension underfunding at the state and local level has rightly received an enormous amount of attention over the past few years. Most public pension funds are significantly underfunded when pension liabilities are valued using economically reasonable assumptions. In fact, Moody’s has calculated total underfunding to be roughly $1.8 trillion as of 2011, meaning the…
Can you condense your many essential financial and legal documents into one portable file container? With many records now stored online, this goal is more attainable than ever. The following ideas can help you pare down the paper documents that represent your financial life. When everything is sorted, clearly labeled and located in one place,…
It’s my experience that there are two keys to being able to maintain control over those urges that get investors into trouble. The first is to understand financial history. That means knowing that stocks are high risk investments, subject to large losses (we’ve had three bear markets with losses of about 50 percent or more…
Behavioral finance is a fascinating field, providing us with many insights into investor behaviors that help explain many of the anomalies that financial theory cannot explain on its own. It also helps explain many of the mistakes investors make. Among the most common of errors is overconfidence. Even concerns over status can lead to suboptimal…
As a member of the BAM ALLIANCE, we are proud to share the news that Eugene Fama, the “father of modern finance” and professor at the University of Chicago Booth School of Business, was recently awarded the Nobel Prize in Economic Sciences along with fellow professors Lars Peter Hansen and Robert Shiller for their “empirical analysis of asset prices.”
The holidays are coming, and a similar scenario will play out all over the country as adults return to their childhood homes to celebrate with their parents and grandparents. The baby boom generation is now on the precipice of retirement. Yet, thanks to healthier lifestyles and medical advances, baby boomers are witnessing their family members’…
I was forwarded an article that American Funds published touting the superiority of its funds relative to index strategies. The piece contains statements like this: “Some investment managers, American Funds among them, have distinguished themselves with a proven track record of consistently outpacing broad market returns.” And other fabulous statements like this: “Obviously, some are…
All but the most diehard proponents of the efficient-markets hypothesis accept the fact that with valuable inside information, one can earn abnormal returns. That leaves this question: Does access to information that is publicly available provide investors with a sufficient advantage to outperform appropriate risk-adjusted benchmarks (generate alpha)? In other words, is the quantity and…
No investor’s portfolio should consist of just one company — even if that company is Berkshire Hathaway (BRK.A) and its CEO, Warren Buffett, is donned an oracle. For those investors thinking I’m wrong, I hope you’ll consider four logical reasons why you shouldn’t create a portfolio consisting only of Berkshire shares, or even allocating more…
You may have seen the television ads that pose the big question: “What’s your number?” The number refers to the balance you need in your investment account to live comfortably in retirement. If these ads make you wonder how you are doing, you are not alone. A single specific number cannot answer all your financial…
The effects of the financial crisis are still with us. And many books have been written about it. Alan Blinder’s new book “After the Music Stopped,” which focuses on the why it happened, is the best I’ve read so far. Blinder, who brings great credibility as both a Princeton University economist and a former Federal…
This chart displays the results of how frequently the words “happiness” and “stress” have appeared in a sample of books written in English and published in the United States…
The third quarter certainly had its fair share of stress for investors. As the quarter came to a close, it was clear the federal government would undergo a partial shutdown on October 1. As if that was not enough, the debt ceiling deadline loomed. There was concern the federal government might default on Treasury bond principal and interest payments or other financial commitments if Congress and the White House failed to act before October 17…