The New York Times had a piece this weekend that proposes a simple portfolio solution for worried investors.
Are you ready for this?
The portfolio is a 50% allocation to stocks and 50% to bonds. The conclusion that the 50/50 portfolio makes sense is based on a study by Vanguard published in October 2011 that finds that this allocation seems to generate consistent returns, regardless of whether the economy is in recession or expansion. The study is based on portfolio performance from 1926 through June 2009.
The 50/50 portfolio generated an average annual return of 7.75% per year during recessions and 9.9% per year during expansions. Continue reading →
Rick Ferri is not sitting on the fence in the active versus passive investing debate. He has both legs firmly planted in the passive camp, as the cover of his new book amply illustrates. Above the title, The Power of Passive Investing, is a picture of a businessman pulling open his jacket to show a Superman-style uniform underneath. In place of the “S” for Superman is a “P” for “Passive”. Continue reading →
Prof. Burton Gordon Malkiel. Photo by J.D. Levine/Yale (photo courtesy of Princeton University)
Burton G. Malkiel, the Princeton professor who brought Efficient Market Theory to the mass market in his classic A Random Walk Down Wall Street has taken up the defense of buy and hold investing, and the idea of diversification more broadly.
None of it’s convinced Malkiel. In a strongly worded defense on the Wall Street Journal’s opinion page, adapted from his introduction to the upcoming 10th edition of Random Walk, he remains as convinced as ever that the average investor should own a diversified portfolio made up of cost-effective index funds and contribute to it regularly and rebalance periodically to take advantage of the benefits of dollar cost averaging. Continue reading →
Mel Lindauer, Forbes columnist, book co-author, Boglehead extraordinaire, draws a road map for young investors in this installment of Portfolio Investing 101. Among his rules: start early, buy cheap if you can, automate your savings, and use your asset allocation to diversify your bets and manage your risk. Continue reading →