Last year, a piece by Michael Kitces and Wade Pfau made the claim that mechanically increasing the equity allocation during retirement — which they term a “rising glidepath” — could reduce the likelihood that a retiree outlives his or her assets and could decrease the magnitude of shortfall when capital market returns disappoint. Specifically, the…
Earlier this summer, I was on a hike with a friend and mentioned that while we’d started at about 9,000 feet, we’d reach an elevation of 12,000 feet by the end of the trail. My friend replied, “That’s a fact I just don’t believe.” Yes, it sounds silly, and of course, we laughed about it….
Boomer Esiason is busy—I mean, really busy. “Starting next Tuesday, all the way until after the Super Bowl in 2015, I think I’ve got about four days off,” he told me. Why, then, was he anxious to talk about financial planning and life insurance? It’s because he has a message for today’s youth: “Protect your…
A large majority of investors have seen their portfolios underperform simple buy-and-hold strategies, despite having followed the stock-picking and market-timing advice of so-called experts. These “experts” include pundits, gurus and forecasters such as Bill Gross, John Hussman, Nouriel Roubini, Meredith Whitney and, yes, even Jim Cramer. Investors confronting subpar returns are left wondering, “What went…
The academic literature is filled with challenges to the efficient markets hypothesis. Perhaps the greatest among these challenges involves the existence of momentum and the poor performance of small-growth stocks and high-beta stocks. Beta is defined as the measure of the systematic risk of a security or a portfolio in comparison to the market as…
No one has a clear crystal ball allowing them to accurately forecast the future. So, it’s a good thing that predicting the results of Standard & Poor’s twice-yearly active-versus-passive scorecard doesn’t seem to require one. It’s a pretty safe bet that the results in each new scorecard — officially called the S&P Indices Versus Active…
Research shows these funds are not producing enough returns to cover trading and operating expenses. I’m not going to make you wait for the punch line. Your single biggest investment mistake is owning any actively managed funds. That’s where the fund manager, through stock picking and market timing, attempts to beat the returns of a…
A well-thought-out financial plan is necessary for successful investing, but even the greatest plan won’t bear fruit if an investor doesn’t have the discipline required to stay the course, rebalancing and tax-loss-harvesting as needed. Unfortunately, even thorough and intelligent plans will sometimes end up in the trash heap because investors lose heart when their strategy…
Your mutual fund manager has a solid plan for retirement. So far, it’s working beautifully. Your fund manager is fortunate to be part of a growth industry. Since 2004, assets under management have grown 124 percent. The number of U.S.-based stock and fixed income mutual funds has grown to more than 5,000. Collectively, they manage…
Q: What are mortgage-backed securities? A: Investors of mortgage-backed securities (MBS) own an undivided interest in a pool of mortgages that serves as the underlying asset for the security, and these investors then receive a share of the resulting cash flows. A nationwide network of lenders — such as mortgage bankers, savings-and-loan associations and commercial…
As kids head back to school, adults spanning several generations set their sites on getting their financial house back in order. What are the most important financial planning considerations in three major demographics—Millennials, Generation X and Empty Nesters? Millennials: First things first – Before making any big financial commitments, like buying a house, figure out…
The financial crisis of 2008 has led to another surge in demand for funds using a tactical asset allocation (TAA) investment strategy. Morningstar currently classifies about 332 funds as tactical asset allocation funds. That’s up from just eight in 2007. The objective of TAA, which originally gained popularity in the 1980s, is to provide better-than-benchmark…
My daughter started her senior year of high school this fall. With college fast approaching, I’ve had some fun discussions with her and family friends about future professions. One thing keeps coming up: It’s the 21st century, and our daughters may still earn less than men for doing the same work. When my daughter graduates…
Choosing good investments is a necessary condition for successful investing. But it’s also important to engage in good behavior once those investments have been selected. The most recent issue of AQR Capital Management’s quarterly newsletter for clients provides great insight into both the bad behaviors investors tend to engage in, as well as positive practices…
A number of academic papers have demonstrated within the last few years that low-volatility stocks have provided greater returns than higher-volatility stocks. As I’ve mentioned before, these findings run counter to economic theory, which predicts that higher expected risk is compensated with a higher expected return. The result is what’s known as the low-volatility anomaly….
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