The Absolute-Return Rip-Off
Investors would love to be able to achieve positive returns in both bull and bear markets, and that’s the “promise”—or at least the premise—of absolute-return funds.
Resources
What Wall Street Doesn’t Want Investors to Know
The recent sharp market decline has brought out the worst in the securities industry and the financial media. Some brokers and pundits who were “riding the bull” have undergone a remarkable transformation and now advise “fleeing to safety.”
Tips for Dealing With the Market Decline
The recent sharp decline in the stock market has investors concerned. Apparently, many “investment pros” thought the market would continue its upward trajectory through 2014. The National Association of Active Investment Managers conducts a weekly survey with advisers and found that they have an astounding 98.3 percent of their clients’ portfolios allocated to stocks. This was a sharp increase over the average of 72 percent allocated to stocks in 2013.
Forget Market Timing, and Stick to a Balanced Fund
Investors were stung, badly, by the financial crisis of 2008. No one wants to go through an experience like that again, which has led to renewed interest in an investing approach called tactical asset allocation
Giving Your Child an Allowance
I earned my first allowance of $2 per month by doing weekly chores. As an 8-year-old, my chores included making my bed, emptying my garbage can, dusting and vacuuming my room. My dad would have surprise “military” inspections to check that we were doing our chores properly. When parents consider giving their children an allowance,…
Retirement Plans: Crucial Conversations
Alan Spector and Keith Lawrence wrote Your Retirement Quest based on a decade of research and interviews with more than 200 retirees. For more about Alan and Keith and their book, go to YourRetirementQuest.com. In this article, Alan and Keith discuss the crucial conversations that people should have as they consider retirement. Have you discussed your retirement…
CalPer’s Private Equity Problem
In an effort to achieve returns that exceed those of the publicly available stock and bond markets, many large pension plans turn to alternative investments such as private equity. California’s CalPers, one of the nation’s largest public pension plans, while using equity index funds for more than one-third of its investments, is increasing its exposure to alternatives.
How the Focus of Dividends Impacts Returns
Many investors, especially those that use a cash flow approach to investing, focus on companies that pay relatively high dividends. The focus on high dividend payers leads to a value strategy. The question for investors: Is that a good value strategy?
Forget Market Timing, and Stick to a Balanced Fund
Investors were stung, badly, by the financial crisis of 2008. No one wants to go through an experience like that again, which has led to renewed interest in an investing approach called tactical asset allocation.
Lessons From 2013: Part IV
Over the last few years we’ve seen a dramatic increase in interest in dividend paying stocks. The heightened interest has been fueled by both the media hype and the current regime of interest rates that are well below historical averages. The low yields available on safe bonds led even many once conservative investors to shift their allocations from safe bonds to dividend paying stocks. This is especially true for those who take an income, or cash flow, approach to investing – as opposed to a total return approach, which I believe is the right approach.
Video Blog on Interpreting Hedge Fund Returns Data
In this video blog, I walk through an example of how I responded to a prospective client who was interested in investing in hedge funds that looked particularly enticing based on their marketing collateral.
Media anoints investment gurus, should you pay attention?
Some high profile investors are good at what they do, while others might just be lucky. Often it is hard to differentiate between the two groups, as both can boast of high returns. The media, meanwhile, quick to jump in and snap up a headline, sings the praises of these winning investors, without identifying who among them made strategic moves and who was just lucky — giving the impression that they are all people to watch.
The Trap of Too Many Choices
I recently got a new smartphone. In the setup process, I was presented with all sorts of options. Selecting a language was pretty easy, but I had to think harder about some of the other ones. Did I want the phone to use my location? Did I want to share data anonymously? Did I want…
The Sad Truth About Hedge Funds
There are many well-documented problems with investing in hedge funds, and it’s hard to know where to start in pointing them out.
Among them are: lack of liquidity; lack of transparency; loss of control over the asset allocation and thus risk of the portfolio; non-normal distribution of returns (they exhibit excess kurtosis and negative skewness); and they have a high risk of dying (12.3 percent per year from 1994 through 2008).
Five Ways to Navigate the Index Fund
As a proponent of passive or evidence-based investing, I am heartened by the growing number of people investing in index funds. According to a Morningstar article, “A Bull Market in Passive Investing,” only 12 percent of U.S. open-end mutual fund and exchange-traded fund assets were invested in passively managed funds as of Nov. 1, 2003. That percentage has risen to 27 percent, and it continues to grow.
