The numbers show that active management simply doesn’t work. There are several arguments against active fund managers, but one of the most damning is that winners don’t seem to repeat.
The market is going to drag your portfolio through every mud puddle it finds. It’s your job to pick your portfolio up, dust it off, and point it back in the right direction. Rebalancing brings your portfolio back into line, and ensures that you are taking the right amount of risk through time.
The financial media loves to talk about interest rates. There are a lot of good reasons for this, but two of the big ones are that interest rates are really important, and they’re relatively understandable and have a direct connection to most people’s lives. They are tied to the mortgage rate you can get, the […]
It’s been a pretty wild ride with GameStop. But while there has been a lot happening, does it actually mean much? We’ve examined the details of what happened elsewhere, so I’m going to focus on some of the bigger questions that this whole affair raises, and specifically how this all impacts long-term investors. So let’s […]
It’s a bit of an understatement to say that GameStop has been in the news lately. There are a lot of people opining about what is going on, but we want to cut through that and look at what actually happened (we look at what it all means in another article). So what actually happened, and […]
A simple approach for building a financial plan is to decide on a rate of return for the investment portfolio and to plug that value into a spreadsheet to represent assumed asset growth. Historical data may be used to calculate historical average returns for different asset classes, which are then combined to create the overall […]
Adjustments for Current Bond Yields An important consideration is that current interest rates are lower than the historical averages. The historical average return is not relevant for someone seeking to estimate future market returns from today’s starting point. The general problem with attempting to gain insights from the historical outcomes is that future market returns […]
Another concern is whether investors are disciplined enough to stay the course with the investment strategy in order to earn the underlying index market returns. Studies on retirement spending from investment portfolios typically assume that retirees are rational investors who rebalance right on schedule each year to their rather aggressive stock allocations. They never panic […]
Inflation We must remove inflation so the numbers allow for a better understanding of purchasing power growth. Real returns will be less because they preserve the purchasing power of wealth over time. Providing the discussion in terms of real returns allows us to plan for the assumption that future spending will grow with inflation. Even […]
Simple analyses, which look to historical returns as estimates for what retirees should expect in the future, tend to provide an incomplete picture that may overstate the potential for stocks relative to other strategies. We will investigate some of the adjustments that should be made to historical returns to obtain a better idea about the […]