Vanguard recently announced that it would be closing its high-yield corporate fund “effective immediately” and that the fund had received “approximately $2 billion” of flows over the past six months. While growth of Vanguard’s assets under management is almost always a good thing, a fund shuttering its doors to new flows makes one wonder just…
The Eurozone debt crisis is now in its third year, and we want to share our perspective on recent developments. It now appears more likely than ever that Greece may exit the Euro currency, and you may be wondering how such a development would affect the markets and our approach to investing. If Greece were…
A mistake that is often made is to say that risk and reward are related when it comes to investing. But if risk and return were always related, there’d be no risk. It’s risk and expected return that are actually related. The price investors have to pay is the chance that the risk will actually…
The following addresses the “60 Minutes” segment from Sunday, December 19 on the state of municipal finances. The “60 Minutes” segment did not expose any new problems in the municipal market. Rather, it highlighted some growing concerns surrounding state fiscal problems and their potential effect on local governments. In fact, Meredith Whitney, who appeared in…
Many people zero in on price when buying insurance. However, that strategy is only safe if you never file a claim. Tom Hopkins of The Delp Company discusses why it’s important to consider more than just the price tag of insurance. A national insurance company has implemented an interesting marketing strategy: Tell us the premium…
The end of Social Security’s payback option means there is less room for error when devising a strategy to maximize your Social Security benefits. The U.S. Social Security Administration (SSA) announced December 8 that, effective immediately, the ability to “pay back” Social Security benefits will be allowed only during the first 12 months following the…
With the current low yields on fixed income securities, the financial media have produced many articles regarding high-dividend strategies. The following discusses two fundamental flaws with using these strategies as alternatives to either high-quality fixed income portfolios or to other equity strategies. While the financial media tout high-dividend strategies as alternatives to other prudent investment…
Many investors have responded to worries about interest rate risk by keeping their fixed income investments restricted to money market accounts and very short-term fixed income securities. The following discusses the risks of following such a strategy and what should be considered. Over the past year, we have received questions about the potential impact of…
While it is true that corporate bonds have outperformed Treasuries, we have not and do not recommend owning corporate bonds for two main reasons: 1) they contain some of the same risks that stocks do; and 2) the historical outperformance has been very small. One of the most important concepts of fixed income investing is…
Currently, rates in the fixed income market are very low. As of September 13, the yield on the five-year Treasury note was close to 1.5 percent. In a low-rate environment in particular, it is critical to understand the differences between and the concepts of coupon rate, yield and expected return on fixed income securities.Coupon Rate…
Many people are questioning whether they should stay in fixed income or branch out to other strategies with higher expected returns, due to low interest rates. The following discusses viewing expected returns between investment strategies. The low interest rate environment has many people wondering about using their fixed income allocation for other strategies, such as…
In this article, we review our thoughts on the value of credit ratings within the municipal market. Even though ratings agencies appear to have misjudged the credit worthiness of some mortgage-backed securities leading up to the financial crisis of 2007–2009, we believe their ratings are still of importance in assessing the default risk of municipal…
In this article, we address why we believe the decision of hiring an advisor should not be based solely on fees. The quantity and quality of the services provided varies greatly from advisor to advisor. When you interview potential advisors, you should look for the advisor who gives the best advice and is the best…
Author: Jim Parker, DFA In December 2011, Barron’s told investors to “buckle up.” The consensus prediction of its panel of ten stock market strategists and investment managers was for the S&P 500 to end 2012 some 11.5% higher, at about 1,360. “That sounds like a big gain, but a lot of things have to go…