Asset Allocation Guide: How Much Risk Should You Take
Today, we begin a series designed to help you determine the best way to allocate your assets. I have written a great deal on this subject, but it's advice worth repeating time and again. We’ll start with focusing on the ability to take risk.
A Farm’s Lessons in Long-Term Planning
When I ask you to think long term, what comes to mind? Ten years from now? One year? One week? In a world where excellence is now measured in milliseconds, it can be incredibly difficult to think past the moment that’s right in front of us.
Start Paying Attention to Tax Efficiency
Much attention has been paid to expense ratios of mutual funds. Yet, despite the fact that taxes have a substantial impact on the long-term performance of taxable mutual fund investors, far less attention has been paid to the impact of taxes on after-tax returns. And while the evidence is clear that it's difficult for active fund managers to create superior investment performance by picking stocks or by timing markets, it's relatively easy to avoid destroying value for taxable fund investors by managing investment taxes. For example, tax-aware funds might attempt to reduce the tax burden by avoiding the intentional realization of any short-term gains and by accelerating the realization of capital losses. Tax management strategies might not only reduce the tax burden, they might also generate lower trading costs. For example, tax-efficient investment strategies exhibit relatively low turnover, generating lower trading costs. In addition, liquidating stock positions with embedded capital losses and holding on to positions with capital gains might generate superior before-tax returns due to the momentum effect.
The Absolute-Return Rip-Off
Investors would love to be able to achieve positive returns in both bull and bear markets, and that’s the “promise”—or at least the premise—of absolute-return funds.
What Wall Street Doesn’t Want Investors to Know
The recent sharp market decline has brought out the worst in the securities industry and the financial media. Some brokers and pundits who were “riding the bull” have undergone a remarkable transformation and now advise “fleeing to safety."
Tips for Dealing With the Market Decline
The recent sharp decline in the stock market has investors concerned. Apparently, many "investment pros" thought the market would continue its upward trajectory through 2014. The National Association of Active Investment Managers conducts a weekly survey with advisers and found that they have an astounding 98.3 percent of their clients' portfolios allocated to stocks. This was a sharp increase over the average of 72 percent allocated to stocks in 2013.
Forget Market Timing, and Stick to a Balanced Fund
Investors were stung, badly, by the financial crisis of 2008. No one wants to go through an experience like that again, which has led to renewed interest in an investing approach called tactical asset allocation
CalPer’s Private Equity Problem
In an effort to achieve returns that exceed those of the publicly available stock and bond markets, many large pension plans turn to alternative investments such as private equity. California’s CalPers, one of the nation’s largest public pension plans, while using equity index funds for more than one-third of its investments, is increasing its exposure to alternatives.
How the Focus of Dividends Impacts Returns
Many investors, especially those that use a cash flow approach to investing, focus on companies that pay relatively high dividends. The focus on high dividend payers leads to a value strategy. The question for investors: Is that a good value strategy?
Forget Market Timing, and Stick to a Balanced Fund
Investors were stung, badly, by the financial crisis of 2008. No one wants to go through an experience like that again, which has led to renewed interest in an investing approach called tactical asset allocation.
