Taylor Larimore, Mel Lindauer and Michael LeBoeuf are the co-authors of The Boglehead’s Guide to Investing. Acolytes of Vanguard founder Jack Bogle, they believe in long-term, low-cost index fund investing. Here’s their advice on what resolutions an investor should make for 2011. Continue reading →
Well it’s that time of year again. That moment when we promise to start afresh and finally do the things we ought to do.
Grab that momentum/optimism/guilt and start your financial year on good footing.
To help, we reached out to some of the experts who’ve shared their insights with Portfolioist in 2010 and asked them a simple question: What would be the very best New Year’s resolution an investor could make moving into 2011? Continue reading →
Using active fund managers versus indexing has been the source of hot and continuous debate for several years. Two academic studies done in the past two years that support active investing are good reason to review the subject. The first study (2009) done by Yale School of Management”s Martijn Cremers and Antti Petajisto, of New York University’s Stern School of Business, goes by the provocative title: “How Active is Your Fund Manager? A New Measure That Predicts Performance“. The title is in direct conflict with what indexing advocates have said for years: that future performance cannot be predicted. The second study, published in 2010 by Antti Petajisto alone, is titled: “Active Share and Mutual Fund Performance“. The reference to predictive performance is eliminated.
What these studies claim is that investors can find funds that outperform their benchmark after costs, sometimes significantly, by seeking out certain types of active management. Continue reading →
If your New Year’s resolutions include saving more for a loved one’s future education, your mind may have turned to 529 plans.
Though the performance of these plans improved last year, according to a recent Wall Street Journal story, there are many such plans, and they vary widely in quality. They particularly vary in terms of the investment options they offer once you’ve put your money into the plan.
“Saving for college is a major financial planning item. Local governments have set up tax exempt saving plans for College which is a great idea. Somehow, what we have ended up with is a confusing mess. The problems come when you look into the details of the plans,” says Simon Napper, president of MyPlanIQ, a firm that analyzes investing options in corporate 401(k) plans as well.
As illustration, Napper put together an analysis of how well investors would have done in the following state plans if they had allocated their investments in a diversified manner. Continue reading →
The ballooning national debt has stoked debate over raising the age for collecting Social Security without penalty. But if anyone was hoping 401(k)s could save the day for retirees, that’s rapidly being proven wishful thinking.
A recent study by actuarial and consulting firm Nyhart found that people relying on their 401(k) to cover their retirement expenses won’t be ready to stop work then. They’ll have to keep at it until 73, on average, to have a shot and not outliving their savings, based on Nyhart’s examination. And because they were not saving enough prior to the recession and then suffered significant losses in 2008, workers in their early 60s now will have to work to 75. Continue reading →
Rob Arnott is one of the few experts who predicted that the past decade was likely to be unpleasant for equity investors. In early 2002, he wrote a paper with Peter Bernstein that concluded that stocks were quite likely to under-perform bonds over the next decade. In mid-2009, having seen a long period in which bonds had, in fact, outperformed stocks, he wrote an article that was titled Bonds: Why Bother?
In this article, Mr. Arnott presents data to demonstrate that bonds have persistently out-performed stocks over a number of very long (multi-decade) historical periods. He then shows that when you look at price appreciation of stocks, net of inflation, there were three 20-30 year periods in the 20th century in which the real prce appreciation of stocks was less than or equal to zero! Continue reading →
Ten companies completed their initial public offerings last week, making it the biggest week for IPOs since November 2007. Chinese offerings dominated, with Youku.com (YOKU), described as a “cross between the US’s YouTube and Hulu” jumping $161 in its first day of trading. That’s the largest “first-day pop since Baidu went public in 2005” according to Renaissance Capital.
Of course, IPOs are often volatile and for every Youku, there’s a Make My Trip (MMYT). That Indian online travel planning site has suffered a big drop in the last few months. Continue reading →
A few weeks ago, Mel Lindauer expressed his worry that the super-low yields offered by bonds these days have people considering questionable move: switching money out of bonds and into dividend-bearing stocks in a search of more income. “People look around and there’s nowhere to turn,” said Lindauer of the fixed income market. “I’m really concerned. I’m concerned that people are talking about possibly going into equities to get the 2.5% yield and forgetting about the risks in equities.”
Larry Swedroe added his voice to the chorus of concern in his MarketWatch column last week. High-dividend stock strategies “are poor substitutes for either a high-quality bond approach or [a] diversified stock approach,” Swedroe writes, Continue reading →
Big mutual funds and financial services firms are putting a lot of focus on investor education these days. Davis Advisors has posted a piece aimed at encouraging long-term thinking called “The Wisdom of Great Investors” that provides a few interesting diagrams (below). Last week we wrote up a Merrill Lynch video also trying to calm still-skittish investors.
Two of the charts Davis created for their report were especially interesting. Continue reading →