Real Estate Investment Trusts (REITs) are companies that own and, typically, manage real estate investments to generate income. REITs may also invest in mortgage securities (these are called mortgage REITs or mREITs). REITs may specialize in specific types of properties. The Folio Investing Retail REIT Folio holds equal-weight allocations to the largest publicly-listed REITs that own and manage shopping centers, outlet malls, and urban retail property. Retail stores lease space from the REITs and the leases are the primary source of income. Continue reading
Generating Income: Part Four of Our Special Five Part Series
During their working years, investors focus on saving and investing with a goal of building wealth. As they enter retirement, either by ceasing paid employment entirely or by scaling back paid employment, investors shift their focus to using their portfolios to provide a reliable long-term stream of income. This transition from building wealth to income generation is the subject of a great deal of research in retirement planning. Once investors are at or near retirement, the most significant financial challenge is using their accumulated savings to provide substantial income for their retirement years. Continue reading
The financial services industry is in a period of substantial change. Low interest rates, new regulations and additional scrutiny are changing the landscape. Perhaps the biggest change is the transition of the first wave of Baby Boomers from working to retirement. Not only is this generation huge, but its also the first “401(k)” generation. The introduction of self-directed retirement accounts, such as 401(k) plans, coincided with the “Baby Boomer Generation” (people born between 1946 and 1964) entering their peak saving years.
Beyond the 401(k)
The 401(k) plan was first introduced in 1980. In 1980, the oldest Boomers were 34 years old and entering the age range at which people really start to save. Not surprisingly, the financial services industry created a multitude of new financial products to pitch to these people. Thus began the era of the mutual fund. Continue reading
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
Jeremy Grantham, of asset management firm GMO, is one of the most insightful ‘deep thinkers’ in the financial world. His outlooks have also proven remarkably accurate through the years. In his latest essay (free registration required), Grantham takes on the issue of commodities prices. His piece is long and detailed, and the issues he raises are of considerable importance (whether or not you actually agree with his conclusions). Continue reading
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
If a picture is worth a thousand words, when it comes to the payoff of diversification, a chart or two may prove even more valuable.
The principles over at MyPlanIQ, a firm specializing in sorting through corporate 401k plans and offering suitable portfolios from the funds on offer, have put several together. They show what portfolio theory teaches: that adding more asset classes to a portfolio improves its performance over time. Continue reading