Sometimes it’s necessary to piece together seemingly unrelated news items to come up with an intelligent, evidence-based plan for investing. This was definitely one of those weeks. Here are three such news items. By connecting the dots, you may be able to improve your returns: Dot No. 1: The odds against picking “winners.” Recently, an investor explained…
The Wall Street Journal reported that, as of June 10, speculators (emphasis mine) held a near-record bet worth $35.7 billion that oil prices would rise on the New York Mercantile Exchange. In the debate about whether investors should consider including a portfolio allocation to commodities, one of the main arguments against doing so has been the huge amount of…
The Federal Reserve’s zero-interest rate policy is now well into its fifth year, probably far longer than most – if not all – investors were expecting. This persistence of low interest rates has pushed many investors to stretch for greater yield from their bond investments. One way to achieve higher yield is to take on…
The financial crisis of 2008 underscored the role that credit risk plays in many investments. And while counterparty risk has been in the spotlight with such derivatives as credit default swaps, comparatively little attention is paid to its impact on exchange-traded notes (ETNs), a type of tracking product. ETNs are relatively new — but rapidly…
We now turn our attention to another way in which structured portfolios can add value over index funds; namely, by creating “core funds.” Core portfolios combine multiple asset classes into one fund. The following provides a good example of why a core approach is superior to a component approach, and is the most efficient way…
A common error made by many bond investors is to avoid purchasing premium bonds – bonds that trade above their face value (or par, typically 100). A bond will trade at a premium when the coupon (stated) yield is above the current market rate for a similar bond of the same remaining term to maturity….
More than three years ago, the bond “king,” PIMCO’s Bill Gross, announced that the world’s biggest bond fund had reduced its U.S. government-related debt holdings from 22 percent in December 2010 to just 12 percent in January 2011, at that time its lowest level in two years. Shortly thereafter, PIMCO announced it had entirely eliminated…
One of the secrets to being a successful investor is the ability to keep your head during a bear market while everyone else around you is losing theirs. To do that, you have to understand that bad news doesn’t necessarily mean stock prices will fall. While this may sound strange, it’s important to understand that…
Neal Merbaum Meet Ben, the CEO of a fictional company. One day, he calls his employees into a conference room for a meeting and starts to assign tasks. “Mark, start typing a letter. Marge, create a spreadsheet. Frank, organize a team.” And so on. But Ben doesn’t tell anyone why they’re doing these things or…
One of the more persistent investment myths is that it is a winning strategy to sell stocks in May and then wait to buy back into the market around November. The oft-repeated catch phrase is, “Sell in May and go away.” Well, this year if you sold your stocks in May, you would probably have…
In February 2012, a group of experienced skiers headed into the backcountry near the Stevens Pass resort in Washington State to look for untracked powder. It was a beautiful day, and everyone expected to have a great time skiing the popular Tunnel Creek section. Minutes after the first skiers began heading down the…
How many times have you had a conversation when you or the other person said something like: “I’m so worried about the stock market.” “I’m so worried about retirement.” “I’m so worried about the value of my home.” Assuming you have said or heard a derivation of one of these statements, ask yourself a big…
Throughout the course of my career, I’ve heard a lot of financial horror stories. The majority of these stories are told by baby boomers whose aggressive stock market strategies went bust, often at the behest of a transaction-oriented “advisor.” The most pain—yes, even marginally greater than that of former Enron employees and Bernie Madoff scam…
Recently, an adviser told me how one of his clients was scammed out of hundreds of thousands of dollars by his son. Let’s call the client “Bill,” the son “Robert,” the adviser “Phil” and the advisory firm “Registered.” Phil works on a team at Registered with another wealth adviser and a portfolio manager. All three interact…
In 2006, I wrote The Smartest Investment Book You’ll Ever Read. Prior to that time, many investment books were long and mind-numbing, filled with charts, and intended to make investing so complex that readers would be incentivized to consult with the author or other financial experts. Smartest Investment broke the mold. It was short and pithy. It…
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