Monthly Archives: October 2011

Goblins, Ghouls and the Halloween Effect

Guest Blog by Kip Robbins, CFA,

Halloween is here and like everyone else, I’ve thought hard  about my costume.  In the past, I’ve worn Lucha Libre masks and cowboy outfits, but generally I like it creepy.  One of my favorites was the year when I donned a horned goblin mask, doctor’s coat and carried two very large and old pipe wrenches.  As regular readers of my articles, you know that I can tie the stock market to just about everything and Halloween is no exception. 

Actually, the stock market and Halloween have a long-documented association.  Continue reading

From the Portfolioist Book Shelf: Freefall by Joseph Stiglitz

 Joseph Stiglitz received the 2001 Nobel Prize in Economics and    shared the 2007 Nobel Peace Prize for his work with the Intergovernmental Panel on climate Change (IPCC). He is a professor of Economics at Columbia University and was Chief Economist of the World Bank from 1997-2000.

Freefall: America, Free Markets, and the Sinking of the World Economy, published in 2010, is Stiglitz’ analysis of what caused the recession of 2007-2009, what we have learned and what we should have learned (but apparently have not). Continue reading

Why You Don’t Have to Occupy Wall Street

MyPlanIQ recently ran an interesting article in their weekly newsletter regarding the Occupy Wall Street movement and the overwhelming wealth disparity in the world. What we liked about this article was the actionable advice towards the end that 401(k) plan participants can take to retain control over building their own wealth—without having to march on Wall Street. Continue reading

Asset Allocation: An Alternative View

In a recent article, I analyzed a model portfolio designed by Money magazine, in conjunction with analysts at Morningstar.  The focus of my piece was whether I could reconcile the projections of risk and return for this portfolio with my own calculations.  I was pleasantly surprised that the results seemed very consistent.

As a follow-up to that piece, I wanted to see whether I could improve this portfolio in terms of the projected performance. Continue reading

Q3 2011: Another Test for 2010 Target Date Funds

The third quarter of 2011 was impressively bad.  The S&P 500 Index lost 13.9% for the quarter.  The VIX, the standard measure of market volatility, repeatedly closed above 40 during this quarter. To put this in perspective, the average daily closing value of VIX from the start of 1990 through the end of September 2011 was 20.5. The average daily closing value for VIX during Q3 of 2011 was 30.6. 

Many critics of Target Date funds felt that these funds lost too much during the bear market in 2008. Special attention was focused on 2010 Target Date funds, funds designed for investors planning to retire in 2010. The poor performance of these funds even got the attention of the SEC, which proposed new disclosure standards. Market observers (including the SEC) noted that 2010 Target Date mutual funds lost an average of 24% in 2008. In light of 2008, many funds redesigned their asset allocations to be more resistant to massive market declines. 

Now, let’s flash forward three years. Continue reading

Sanity Checking Estimates of ‘Expected Returns’ in Retirement Planning

One of the most important variables in creating an investment strategy to meet a specific goal (such as retirement) is what you assume about the future returns from stocks, bonds, and other available investment opportunities.  Another highly important input to planning is your estimate of the risk associated with each investment alternative.  These estimates of future risk and return will determine how much you need to save, when you can expect to retire, and how much income you can expect in retirement.  Where do these estimates come from?  Continue reading

Tax Loss Harvesting Season is Here

Believe it or not, year-end is right around the corner which means that it’s time for investors to start thinking about their tax implications. In order to help you make sense of it all, we wanted to share this article originally published last year by guest blogger Steve Thorpe. Enjoy–

Would you invest a few short hours to reduce this year’s taxes by $1,000 or more? For investors with taxable investment accounts, this is often possible by taking advantage of tax loss harvesting (TLH). This perfectly legal strategy makes lemonade from lemons, allowing Uncle Sam to share part of the pain of the losses inevitably experienced by investors at some points during their investing career

Between now and the end of the year is a good time to review your portfolio to see if any of your holdings are in the red. If so, you might be able to use those losses to help lower your 2010 tax bill.

In this article I’ll review:

  1. How to harvest a tax loss and under what circumstances you might want to.
  2. Why you need to keep track of what your investments cost in the first place.
  3. How to properly rebalance your portfolio after a sale, without triggering undesirable tax consequences.
  4. The way investments look from a tax perspective: short-term losses can be more valuable than long-term losses. But hold onto gains at least a year and a day.

Continue reading