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The S&P 500 Doubled: Did You Miss It?
Tweet Share on Facebook February 25, 2011 Comment (5)Two years ago, a lot of articles, blogs, and opinions questioned the logic of buy-and-hold investing. Regardless of recent financial history, I still believe that the foundation of any good investment strategy is a globally diversified portfolio. I also believe that any good investment strategy is born from a complete and comprehensive financial planning analysis.
That should not shock anyone. Given the recent financial crisis and the ensuing rebound in equity markets, those who maintained a diversified portfolio have been well rewarded over the past 700 days.
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Analysis Paralysis: 3 Ways Investors Can Break Free
Tweet Share on Facebook February 24, 2011 CommentSince March 2, 2009, a significant investor demographic has sat frozen on the sidelines while the S&P 500 has soared skyward by more than 95 percent. To get a sense of just how much cash left the market and headed for the sidelines, a September 2009 Bloomberg study reported that record levels of bank deposits and money market funds reached a shocking $9.55 trillion—enough to buy all the companies in the S&P 500 at the time.
Considerable portions of these reserves have courageously found their way from the sidelines and into the market over the past 18 months. Still, many investors remain skeptical. To their consternation, these befuddled bystanders have witnessed the Dow Jones industrial average march steadily past 8,000, through 9,000, then 10,000, 11,000, and finally the 12,000 barriers.
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How Your Investments Are Taxed
Tweet Share on Facebook February 23, 2011 CommentAfter the first of the year, people begin to think about how much they will owe Uncle Sam on their investment returns. Oftentimes, people really don't understand how to forecast or calculate that IOU. For starters, there is a difference between how various types of investments are taxed. Here are some pointers to help you understand how your investments are taxed:
Stocks. Stocks make money for you with dividends and capital gains. Dividends are taxed at two different rates—ordinary income rates for non-qualified dividends and a 15 percent level for qualified dividends. (Thanks to the Bush tax-cut extensions, the 15 percent rate still holds true.) Check to make sure your dividends are qualified for the better tax treatment.
[See The Tale of Two Taxes.]
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Don't Pay Attention to the Gold Bugs
Tweet Share on Facebook February 18, 2011 Comment (15)You've heard the term "gold bug." It's used to describe someone who is bullish on the bright, shiny, heavy yellow metal that is part of the commodities asset class.
Gold bugs concern me. Here's why:
They always seem to feel that the world is coming to an end and as a result, believe a huge proportion of their assets should be weighted to the precious metal asset class, specifically gold. They simply don't believe in a well-diversified portfolio.
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Why Investors Should Own a Little Bit of Everything
Tweet Share on Facebook February 17, 2011 Comment"Nobody knows nothing" is a statement made by screenwriter William Goldman about the movie business. He meant that even after making movies for more than 100 years, no one actually knows exactly how to make a successful movie. Sometimes sure things bomb. Sometimes long shots win big.
The investment business is no different. Here's the truth:
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5 Things Investors Should Know About Mutual Funds
Tweet Share on Facebook February 16, 2011 Comment (1)Mutual funds are one of the best ways to invest in the stock market. They are diversified, easy to trade, and come in virtually every size imaginable. But, there are factors you need to understand before you invest with this vehicle. Here are five things to consider before investing:
Many mutual funds have loads. A load is a fee paid to your broker or advisor for selling the fund to you. Loads can be charged in different ways: front (A shares), back (B shares), level (C shares), and no load. Front loads are charged up front and range between 3 and 6 percent. That up-front fee comes from your investment, and most of it is paid to your broker. Back-loads are not charged up front but are assessed if you take your money out of the fund prior to a certain period of time (typically four to seven years). Level-loaded funds usually carry a one percent additional internal expense paid to your broker. Many level-loaded funds also carry a 1 percent fee for liquidating the fund within the first year. Both back-loaded and level-loaded funds carry a higher internal expense ratio, which will be discussed below. No-load funds do not carry a fee. But remember, the reason no-load funds are cheaper is because no advises you. Therefore, no one needs to be paid.
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5 Things You Need to Know About Bonds
Tweet Share on Facebook February 15, 2011 CommentInvestors continued to pour money into bond funds last year, even though bond prices fell in November and December. In 2010, investors added $234.8 billion to taxable bond funds and yanked $28.8 billion out of stock funds, according to the most recent net new cash flow data from the Investment Company Institute, which tracks mutual fund flows. If you're thinking about jumping on the bond bandwagon, here are some things you need to know before you buy:
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Why ETF Investors Need to Do Their Homework
Tweet Share on Facebook February 11, 2011 CommentThis week I spoke at the 4th annual Inside ETFs Conference in Hollywood, Fla. It was an extremely well-attended event with over 900 attendees, live broadcasts from CNBC, and information booths from every major ETF vendor.
I'm a huge fan of exchange-traded funds—I've been managing portfolios composed entirely of ETFs for almost 10 years. I think the ever-increasing size of the ETF market, and the number of new issuances in registration, proves ETFs are here not only to stay, but to dominate. Actively managing passive investments is a fantastic way to construct globally diversified portfolios that are cost-effective and tax-efficient.
However, for all their good and effectiveness, ETFs are fraught with peril for the uninformed investor and adviser. Here are a few reasons why:
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Why Early Retirement May Not Be Your Best Option
Tweet Share on Facebook February 10, 2011 Comment (1)The Great Recession has caused many to rethink their retirement plans. According to TIAA-CREF, the economic downturn has caused 37 percent of Americans to put off retirement. With nest eggs depleted, the prospect of dropping the 9-to-5 grind in favor of leisure and the glory of the golden years is now a distant dream.
Recent research, however, reveals that early retirement may not be the panacea many have hoped. A slew of negative health effects has been correlated to early retirement starting with memory decline. And, unfortunately, mental exercises don't seem to help. Lisa Berkman at Harvard's Center for Population and Development states, "If you do crosswords or Sudoku, you get better at crosswords and Sudoku. You don't get better at cognitive behavior in life."
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5 Reasons Investors Fail to Plan
Tweet Share on Facebook February 9, 2011 Comment (1)We've all heard the old line: "People don't plan to fail; they just fail to plan." It's important to recognize that there are specific reasons people often fail to plan, and knowing these reasons is half the battle on the journey to success.
Procrastination. The main reason people often fail to accomplish their goals is due to procrastination—putting off what can be done today until tomorrow. The problem is "tomorrow" never comes. Defeating procrastination is all about setting deadlines. Instead of saying, "I am going to open an IRA," it's better to say, "I am going to open an IRA by the end of the month." When you have a deadline, you can accomplish goals more easily.
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