Many of you have some fundamental beliefs about the process of investing. These beliefs understandably guide your investing behavior. Unfortunately, they are often dead wrong. This is not surprising, because the financial media and the securities industry have a vested interest in encouraging short-term thinking and other emotional behavior harmful to your returns. Here are…
Earlier this week, we discussed the first six of a total 12 lessons that the markets taught us in 2014 about prudent investment strategies. To recap: Lesson 1: Active management is a loser’s game Lesson 2: The economy and the stock market are very different things Lesson 3: Diversification is always working; sometimes you like…
Last week, a conversation with a friend reminded me how easily we can confuse actual risk with our own exposure to that risk. My friend travels a lot for work, and I asked him where he planned to go this year. His answer surprised me. “I don’t know,” he replied. “With everything going on in…
Q: What are the risks of alternative yield-seeking strategies? A: Replacing a portion of your high-quality bond or bond mutual fund holdings with strategies ranging from high-dividend stocks to oil-and-gas master limited partnerships because “rates are low” involves taking on substantially more risk. A more efficient way to increase your level of risk is to…
Investment “professionals” could be killing your chances of retiring with dignity, if at all. This extract, from one of America’s most respected financial journalists, William Bernstein, should be read and reread by every investor: “There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and…
Today marks the final installment in my series addressing the lessons that the markets taught us last year about prudent investment strategies. As we noted previously, 2014 provided us with a total of 12. You may have observed by now that many of these same lessons show up year after year. And many times, the…
A tale of youthful stupidity holds the key to giving honest, genuine financial advice. The most important event in my life is one of which I was long ashamed. I was an 18-year-old punk with a monumental chip on my shoulder. You know, the kind of kid certain of his indestructability, sure of his immunity…
Institutional plan sponsors are charged with investing trillions of dollars on behalf of pension plans, endowments and foundations. As a result, the quality of the investment decisions made by these plan sponsors is of great interest and importance to a great many people. Over the years, I’ve met with many institutional plan sponsors to discuss…
One of the more common and costly investing mistakes that individuals tend to make involves the behavior known as “recency,” which can be described as the bias toward overweighting recent events or trends, and ignoring long-term evidence. Recency leads investors to buy after periods of strong performance (high) and sell after periods of poor performance…
At the start of each year, I compile a list of predictions that financial gurus and industry experts tell us are a “sure thing.” And each year, I track how many of these predictions actually come true. This marks our fourth and final quarterly review of some consensus financial predictions that pundits in the financial…
Intelligent and responsible investing can be simple and uncomplicated. It involves buying a globally diversified portfolio of low management fee index funds, exchange-traded funds (ETFs) or passively managed funds in an appropriate asset allocation. After the initial purchase, there is very little to do except rebalancing perhaps once or twice a year and tax-loss harvesting…
Every year, the markets provide us with some valuable lessons about prudent investment strategies. Many times, the markets offer investors a remedial course that covers lessons it had imparted previously. That’s why I like to say there’s really nothing new in investing, only investment history you don’t yet know. Last year provided us with 12…
The day after Christmas, a skier was caught in an avalanche near my home in Park City, Utah. Part of a foursome, the skier slid with the snow for about 500 feet before ending up buried to his neck. Luckily, his party found him, dug him out, and discovered he hadn’t been injured. The group…
Last year was a tough one for disciplined investors. Disciplined investors know that diversification is a key element of successful portfolio management. But investors who stayed the course and remained diversified were punished for it in 2014, at least in the short term. Disciplined investors will continue to be taunted over the coming weeks and…
Last week, we discussed the first three of a total 12 lessons that the markets taught us in 2014 about prudent investment strategies. Today we’ll cover lessons Nos. 4 through 6. Many of these lessons appear year after year. But a lot of investors simply fail to learn from them, and instead repeat the same…