Percentage of Actively Managed Mutual Funds Outperformed by the S&P 500 Index (Periods through June 30, 2012) Sources: Lipper and The Vanguard Group.
One asset class that belongs in most portfolios is bonds. Bonds are basically IOUs issued by corporations and government units. (The government units might be foreign, state and local, or government-s...
Look for growth situations with low price-earnings multiples. If the growth takes place, there’s often a double bonus—both the earnings and the multiple rise, producing large gains. Beware of very hig...
In one celebrated incident, an analyst who had the chutzpah to recommend that Trump’s Taj Mahal bonds be sold because they were unlikely to pay their interest was summarily fired by his firm after thr...
By buying a share in a total market index fund, you acquire an ownership share in all the major businesses in the economy. Index funds eliminate the anxiety and expense of trying to predict which indi...
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...
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...
Only liars manage always to be out of the market during bad times and in during good times.
In David Copperfield, Charles Dickens’s character Wilkins Micawber pronounced a now-famous law: Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annu...
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...
As an investor, you have one powerful way to keep from getting distressed by devilish Mr. Market: Ignore him. Just buy and hold one of the broad-based index funds that
As an investor, what should you do about forecasts—forecasts of the stock market, forecasts of interest rates, forecasts of the economy? Answer: Nothing. You can save time, anxiety, and money by ignor...
A blindfolded chimpanzee throwing darts at the stock listings can select a portfolio that performs as well as those managed by the experts.
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...
WHAT DOES IT ALL MEAN? The lessons of market history are clear. Styles and fashions in investors’ evaluations of securities can and often do play a critical role in the pricing of securities. The stoc...
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 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.
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.