What is An Asset Allocation? And Why is it Important?
Your Asset Allocation is simply a fancy way of saying what you put in your investment portfolio. It’s also one of the fundamental parts of your retirement plan. It defines how you spread your investments across different types of assets—like stocks, bonds, and cash—and ultimately determines the balance between risk and return that you take on. […]
Inflation and Your Retirement Plan
Planning for inflation is crucial when designing your retirement plan. While the average annual inflation rate from 1926 to 2023 was around 3.01%, expectations for the future are somewhat different. In this article, we explore how Treasury Bonds and TIPS (Treasury Inflation-Protected Securities) help us gauge future inflation expectations and how this impacts retirement planning. […]
What is Risk?
Risk is one of those complicated concepts that you can’t really pin down to one definition, but it’s the single most important factor for investors.
Fixed Horizons vs. Survival Probabilities in Retirement Planning
How long you are going to live (and spend) is an incredibly important number in your retirement plan. Unfortunately, we really have no way to determine this number when you are planning for retirement. We certainly have ways of estimating your future longevity by looking at life expectancy numbers – essentially the likelihood that you […]
Essential vs. Discretionary Spending: Planning Your Retirement Budget
Not all of your spending is created equal. And it would help if you didn’t pretend like it is. But it’s distressingly common for people to simply decide they want a certain amount of income each year in retirement and leave it at that. Even leaving aside how our spending changes throughout retirement, it’s essential […]
How Useful is Historical Data in Predicting Future Returns?
Effectively all of our understanding of finance and investing is based, at least to some degree, on historical returns. But how good of a guide is the past? Is it actually different this time? We’ve already talked about the limitations of models in how we understand investing, and how we use statistics to analyze what’s […]
What is the Role of Bonds in Your Portfolio?
A lot of the time, investors view each of their investments in isolation. They focus on how this fund or that fund did. But this is a fundamentally wrong headed approach. Just like your investment portfolio only really matters – and can only be evaluated – in the context of your overall retirement plan, you […]
What is the Efficient Market Hypothesis? And What Does it Mean for You?
Navigating the financial markets can often feel like you’re in a labyrinth, with news outlets, analysts, and every ‘guru’ on the internet vying for your attention, each one painting a picture of the market landscape teeming with endless opportunities for extraordinary gains (or horrific losses). But there’s an easy way for investors (whether you’re focused […]
Choosing Between Individual Bonds and Bond Funds in Your Investment Portfolio
When investors are looking at their bonds, one of the most common questions is whether they should use individual bonds or bond funds (either in the form of mutual funds or ETFs) in their investment portfolio. Interest rates have come up over the past few years, so the yields on bonds have also come up. […]
Home Sweet Home Bias: Overweighting US Stocks in Your Portfolio
Investing is deceptively simple. Until it’s not. As investors, we want to start with the market portfolio—that is, by definition, the most efficient portfolio. But we’ll also want to customize our investments to address our specific situation. For instance, the global bond market is substantially bigger than the global stock market, but most retirement-focused investors’ […]
