The Wall Street Journal’s recent article, “Same Returns, Less Risk” discusses different approaches to managing portfolio risk while maintaining exposure to potential returns available from stocks and other riskier asset classes.
If you are a Portfolioist reader, you know that we’ve written about the importance of risk budgeting in the past (see, “Risk Budgeting: A Critical Tool for Portfolio Management”). You also know that we believe that risk budgeting is an important part of successful long-term investing. That’s why we constructed our line-up of Target Date Folios using a risk budgeting approach—and this stands in stark contrast to the strategy used in more traditional Target Date Mutual Funds that generally use static asset allocations that don’t adjust their risk allocations in volatile market conditions. Continue reading →
Guest post by Contributing Editor, Robert P. Seawright, Chief Investment and Information Officer for Madison Avenue Securities.
I haven’t seen it yet, but I love the conceit behind the indie filmSafety Not Guaranteed, which has opened to excellent reviews. The words of the title are found in a mysterious classified ad in a local paper seeking a partner for time travel. The ad also states that applicants will need their own weapons and, ominously, “safety not guaranteed.”
While the white paper covers a number of elements of the life cycle asset allocation problem, I’d like to focus on one in particular: How much can a 65-year-old investor approaching retirement really afford to lose? Continue reading →
Morningstar’s recently published article called “Our Favorite Dividend ETFs for 2012” makes the case for investing in stocks on the basis of dividend yield. I also recently published an article in Advisor Perspectives on dividend-oriented funds called “Finding the Best Dividend Fund” that discusses why dividend-oriented investing makes sense. Both articles explore what makes an attractive dividend-focused stock fund and provide lists of dividend-oriented funds and their characteristics.
The Morningstar article states that high-dividend stocks have outperformed non-dividend stocks by an average of 3% per year from 1927 to the present. The source data for this analysis comes from Kenneth French, a well-known professor of Finance at the Tuck School of Business at Dartmouth. French is an Continue reading →
Guest post by Contributing Editor, Lowell Herr, ITA Wealth Management. Lowell is a subscriber to the Portfolioist and his investment philosophy is similar to ours. Enjoy.
If passive investing is so successful, why is it that so few investors actually use this approach to construct and manage their portfolios?
Good question and one that likely has a score of answers.
Here are a few to consider:
1. There is a large collection of investors who are confident they can beat the market. Ego certainly enters into this thinking. Why would I be investing if I did not think I could outsmart the majority of other investors?
2. Index investing does not have “water cooler” appeal. For some reason, Continue reading →
There is a story getting considerable coverage this week about a study that finds that an average family may end up having 30% less in total lifetime accumulated wealth in their 401(k) plans due to high fees and expenses. The study inspiring all of this attention is titled “The Retirement Savings Drain” and published by policy research firm Demos.
The Demos study estimates that the all-in costs of a 401(k) plan, (including fund expense ratio, trading costs and administrative fees) average 1.56% of assets per year. This figure is based on asset-weighted average expense ratios for mutual funds and assuming trading costs that are pretty reasonable. The all-in cost estimates are fairly consistent with other estimates that I have read. Participants in large low-cost plans may pay less and participants in small company plans tend to pay Continue reading →