Tag Archives: DALBAR

Saving and Investing for Retirement: Part Three

Realities of Investing: Part Three of Our Special Five Part Series

In the various calculations that project retirement portfolio accumulations through time (such as the two discussed in the previous article), there are assumptions about how investors will allocate their savings and how those investments will perform.  In the case of the Fidelity study, no specific asset allocation is provided that would achieve the assumed risk-free 5.5% annual return.  In the Ibbotson study, the authors assume that investors hold a combination of a stock index fund and a bond index fund that progressively allocates less to stocks and more to bonds as investors get older.  The Ibbotson study also assumes that the stock index (the S&P 500) will have an average annual return of 10.96% per year and that the bond index will have an average return of 4.6% per year.  The Ibbotson study ignores expenses associated with investing. Continue reading

Retirement Solutions: Target Date Investing

Investors Have Lost Their Way

The aggregate performance numbers and evidence suggesting that most investors are holding inappropriate asset allocations foretell disaster for the investors who are relying on their 401(k) plans as the primary source of their retirement income.

There is little question that the average investor would benefit from some help in portfolio construction and maintenance.  Continue reading

Is Indexing the Answer to Herd Investing?

That investors buy at the top and sell at the bottom is a sad truth that has been well-established as typical financial behavior. A column in today’s Wall Street Journal raises the question: what should investors do about that?

The usual answer is to argue for indexing — if we “can’t” beat the market, we might as well join it. But the Journal’s Brett Arends says the better answer is to bet against the herd: when the market is going up, get out. When it’s going down, buy. Continue reading