A major advantage of indexing is that index funds are tax efficient. Actively managed funds can create large tax liabilities if you hold them outside your tax-advantaged retirement plans. To the exten...
You are also allowed to Roth and Roll. You can roll the balance of your traditional IRA into a Roth, again if your income level qualifies.* You need to pay tax on the amount converted, but from then o...
Thus, purchasing a fund holding all the stocks in a broad-based index will produce a portfolio that can be expected to do as well as any managed by professional security analysts.
Those with a broader view—investors who recognize that the world has changed considerably since Markowitz first enunciated his theory—can reap even greater protection because the movement of foreign e...
The stock market as a whole has delivered an average rate of return of about 9½ percent over long periods of time. But that return only measures what a buy-and-hold investor would earn by putting mone...
The secret to success and enjoyment in so many parts of life is to know your capabilities and stay within them. Similarly, the key to success in investing is to know yourself and invest within your in...
Rebalancing will not always increase returns. But it will always reduce the riskiness of the portfolio and it will always ensure that your actual allocation stays consistent with the right allocation...
October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February. —Mark Twai...
Benjamin Franklin provides us with an actual rather than a hypothetical case. When Franklin died in 1790, he left a gift of $5,000 to each of his two favorite cities, Boston and Philadelphia. He stipu...
Dividends,
A blindfolded chimpanzee throwing darts at the stock listings can select a portfolio that performs as well as those managed by the experts.
With no-load index funds, no transaction fees are levied on contributions. Moreover, mutual funds will automatically reinvest all dividends back into the fund whereas additional transactions could be...
Two-thirds of professionally managed funds are regularly outperformed by a broad capitalization-weighted index fund with equivalent risk, and those that do appear to produce excess returns in one peri...
Two behavioral economists, Terrance Odean and Brad Barber, examined the individual accounts at a large discount broker over a substantial period of time. They found that the more individual investors...
The average actively managed mutual fund charges about one percentage point of assets each year for managing the portfolio. It is the expenses charged by professional active managers that drag their r...
So-called total stock market funds will include both real estate companies and commodity products. Broad equity diversification can be achieved with one-stop shopping.
Percentage of Actively Managed Mutual Funds Outperformed by the S&P 500 Index (Periods through June 30, 2012) Sources: Lipper and The Vanguard Group.
Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.
Only liars manage always to be out of the market during bad times and in during good times.
Just as contagious euphoria leads investors to take greater and greater risks, the same self-destructive behavior leads many investors to throw in the towel and sell out near the market’s bottom when...