Monthly Archives: August 2011

The Changing American Workforce: Can They Still Retire?

The Wall Street Journal recently published the article, “What’s Wrong with America’s Job Engine?” which talks about the changing relationships between employers and workers in the wake of the recession. The article suggests that companies have not ramped up their hiring in the ways that many expected.

The first thing that really jumped out at me was that over the past ten years, the U.S. economy’s output of goods and services increased by 19% —but the number of private sector jobs —declined by almost 2 million. Sure, part of the decline in jobs can be blamed on the recession, but David Wessel, the article’s author, notes that much of the shift is due to long-term changes in the U.S. job market—meaning that American business is looking to do more with less. Continue reading

Answering David Swensen’s Call to Arms

David Swensen has been called Yale’s “Money Guru”—and rightly so. As the head of Yale University’s highly successful $16 billion endowment, he has created an amazing performance record.  Over the last 10-years (through Yale’s 2010 fiscal year), for example, the endowment had an annualized return of 8.9% vs. 1.5% for a portfolio allocated 70% to U.S. equities and 30% to U.S. bonds.

Mr. Swensen is also the author of two highly influential books—Pioneering Portoflio Management: An Unconventional Approach to Institutional Investment (for Institutional Investors) and Unconventional Success: A Fundamental Approach to Personal Investment (geared toward individual investors)

By anyone’s standard, Mr. Swensen is one of the most credible voices on investing and portfolio management, which is why when he lambasted the mutual fund industry in a recent New York Times op-ed called, “The Mutual Fund Merry-Go Round,” I thought that his “call to arms” needed further discussion. Continue reading

From the Portfolioist Book Shelf: Live It Up Without Outliving Your Money!

Guest Blog by Steve Thorpe

Are you a do-it-yourself type seeking strategies to manage your retirement investments?

Thousands of books, magazines, web sites, and broadcast media sources promise help, however many publications are in fact cleverly designed to market expensive Wall Street products that pay for others’ retirements – not yours!

In contrast, Paul Merriman’s Live It Up Without Outliving Your Money! Getting The Most From Your Investments In Retirement is a great resource for investors researching techniques to effectively manage their retirement portfolios. Here I share a few chapter highlights that I hope will whet your appetite for more. Trust me, you will find many valuable tips in this book. Continue reading

When Market Volatility Returns with a Vengeance

Wall Street has a bad case of the downers lately. With triple-digit drops in the Dow one day and double digit jumps the next many investors chose to take shelter on the sidelines as they pried open a bottle of Pepto.

The picture is not pretty: As of August 10th, investors could only stand back and watch as the S&P 500 Index continued a 20-day trading sell-off resulting in a 14% loss. So what does it mean and what should we do about it when the market as a whole suggests that the value of a broad index of U.S. companies is 14% less today than a month ago?
Continue reading

Target Date Strategies Weather the Storm

Institutional Investor just published an article titled “Where Does The Market Chaos Leave Target Date Funds?”

I don’t need to tell you what you already know—that recent weeks, months and even the past few days have been highly volatile. The article, which came out on August 10th, raises an interesting point:  The main motivation for Target Date strategies is a long-term “buy and hold” approach that investors expect to be sufficiently diversified to weather any sharp declines in any particular asset class—just like we all saw just this week.

This is, in fact, the very definition of diversification. Continue reading

Why Low-Beta Strategies are Worth Another Look

Just last month Geoff Considine wrote an article about why investors may want to explore low beta strategies in a  highly volatile market.

 Here at the Portfolioist, we thought we’d re-post the article in reponse to this week’s  wild ride on Wall Street.

The recent volatility in the stock market has many investors trying to figure out how to maintain some exposure to equities, while limiting their exposure to the big ups and downs of the major equity indexes.

One alternative is to manage a portfolio’s beta, a measure of how a portfolio tends to respond to movements in a broad index (most commonly the S&P 500 Index). Continue reading

Why Warren Buffett Was Right: “Diversification is Protection Against Ignorance”

The volatility in the broad stock market has shaken investors’ belief in the true value of portfolio diversification. The problem is that many of the people who believe that diversification no longer works, may not know how to build a truly diversified portfolio.

Warren Buffett is widely quoted as saying : “Diversification is protection against ignorance.” I’ll admit, that sounds pretty negative. But what I believe he meant, however, is that you diversify when you are not sufficiently confident to bet on which asset (or asset class) will do well and which will do poorly. 

Clearly, Mr. Buffett has done very well in managing a concentrated portfolio. But are you willing to take that bet? Continue reading