Author Archives: Cathy Sentnor

The Evolution of Retirement Plans

These days, most of the news about the state of our retirement savings is bad news . But a recent study from Fidelity Investments contained two very good pieces of news.

  • The average 401(k) balance among the clients the firm surveyed, rose to $74,900 at the end of the first quarter of 2011. That’s the highest it’s been since Fidelity began tracking account balances in 1998, a 12% increase from a year ago and a 58% jump from the same time period two year earlier.
  • Nearly one in 10 participants increased his or her deferral rate during the first quarter. That’s the biggest move in that direction in the past five years.

To some extent, this good news is a triumph of applied Behavioral Finance. Since academics started parsing investor behavior in 401 (k) accounts several decades ago, it’s become clear that Americans have Continue reading

U.S. Investor Behavior: The Government Report

The Securities and Exchange Commission has launched an investor education site, that includes a comprehensive summary of what we’ve learned over the last 30 years about how we investors behave and the mistakes we make. This Library of Congress report published last August, Behavioral Patterns and Pitfalls of U.S. Investors, manages in sixteen pages to highlight some of the most important insights of the work of leaders in this academic field like Terrance Odean, Richard Thaler, Daniel Kahneman, Meir Statman, and many others.

The Role of Behavioral Finance

Nestled into a site that is largely a primer for new investors, the study is an interesting acknowledgement by the top securities regulator that there’s value to be found in better understanding our own true investing selves. Continue reading

Tactical Driving

Earlier this week we ran a piece on the difference between Tactical Asset Allocation and passive investing. In this guest post,  Michael A. Gayed of Pension Partners, a Tactical asset manager, weighs in.

As we approach summer, I can’t help but think about how people drive. After all, Americans are expected to be on the road to go on vacation as the weather gets warmer. Continue reading

What’s the Difference Between Passive Investing and Tactical Asset Allocation?

Recently we wrote a post about Tactical Asset Allocation and how tough it can be to execute effectively. That in turn set off a discussion of the lack of meaning in terms like “buy-and-hold” and “tactical asset allocation.” I was accused of setting up a false dichotomy. There are stocks that you buy and hold. You do that because they continue to do well, argued Roger Lowenstein. But you do have to be willing to let go of the ones that aren’t working.

Lowenstein believes in stock-picking, but if you don’t think that you have that skill, or if you want to balance a few such picks with a broader diversified approach, then you may indeed be interested in the passive v. allocation debate.

In a recent post on his Wise Investing blog, Larry Swedroe sought to better explain just what passive investing in. It is not “by and hold.” Passive investing is passive, but not pulse-less. Continue reading

The Wealth(y) Solution

When it comes to investing, it turns out that the rich are just like me and you, only with a few more zeros. They too worry about investment losses more than they appreciate gains. They too often let emotion hold sway over their investing decisions.

So says Eric Golberg co-author of a new book called The Wealth Solution and the Director of Wealth Management for Loring Ward, a San Jose, Calif.-based investment manager with more than $7 billion in assets under management that published the book.

Golberg should know. Continue reading

Searching for the Best Internet Investing Sites

Question: How many personal finance websites do you think there are on the World Wide Web?

Answer: nearly 4,100, according to The Nielsen Company.

Question: How many good ones are there?

Answer: Far, far fewer according to one study.

Finance Websites That Work

In a study published this March, by the Center for Retirement Research at Boston College, Kimberly Blanton searches for the “finance websites that work.”

Blanton, a one-time Boston Globe reporter, now a writer for the Financial Security Project at BC splits the successful sites into three broad categories: financial data aggregators, financial decision tools, and personal finance communities. For each she selects a few of the most successful and searches for patterns behind their success. Continue reading

Cool Investing Tools: Portfolio Instant X-Ray

Sometimes we are not as diversified as we think we are. To see what your portfolio actually looks like, rather than just what you want it to look like, you might find it useful to use a free Morningstar tool called the Instant X-Ray. The Instant X-Ray is easy to use. Simply enter your holdings, include how much is in each holding and the Instant X-Ray sorts through their data and gives you a read on just how diversified you are.

Insight Into Your Portfolio’s Current Holdings

The process only takes a few minutes. For people who have investments in a couple of different places (Individual Retirement Account, 401(k), accounts) the tool allows you to aggregate your holdings in one spot and get an overall read on how well you’re meeting your diversification plan. Continue reading