“Are bonds safe?” asked a fellow in a café who recognized me from the Friday paper. He then looked down and lamented having to pay NIS 22 instead of NIS 14 for his coffee. “Inflation,” I commented. Then he asked for advice about bonds: “If the central bank raises interest rates to control inflation (rising prices),… Read more
Can market timers outperform the market?
One of the most watched bets in investment history just wound down. Ten years ago, billionaire stock investor Warren Buffett wagered that the S&P 500 Index would outperform five hedge funds over the next decade. The bet was a classic “passive investing” vs. “active investing” showdown…. Read more
There are many factors to consider before buying a stock, but the sticker price shouldn’t be one of them.
This joke illustrates why:
A market analyst walks into a pizzeria and orders a pizza. When the pie is ready, he’s asked, “Should I cut it into eight or 16 pieces?”
The analyst replies,… Read more
According to conventional “growth vs. income” investing advice, if you are a young, upwardly mobile millennial you should put more money in growth stocks that have more risk, but higher potential than other investments. If you’re closer to retirement, you should choose a more conservative investing strategy. Yet even retirees need some growth to counterbalance inflation,… Read more
Retirees who diversify globally protect themselves from investing with too much home bias.
If you are saving for a future retirement, your goal is probably to grow your capital. If you only focus on higher returns, though, you may take risks you cannot afford. Markets are volatile. Diversifying globally may be a good way to lower volatility and smooth out returns…. Read more
A retiree called me, nervous about the stock market crashing. He wanted to know if he should abandon the markets by selling his stocks and staying in cash.
An alternative to timing the market
Since you can’t predict when the market will crash, you need a good defense. Historically,… Read more
In a well-diversified portfolio, you normally have three different type of earnings — appreciation, dividends or interest. “Appreciation” is the growth in the value of your investment based on the market going up. Income investors receive “dividends” or “interest” on their investments.
Interest
Interest is what you earn on money you lend out. … Read more
Corporate and Treasury bonds can help you turn your nest egg into an income stream. In fact, generating a steady income stream to supplement your pension may be one of the hardest parts of retirement.
Bonds have a set interest rate and they usually pay twice a year so you know exactly how much income you should receive and when you can expect to receive it…. Read more
Wouldn’t it be great if there was a fail-proof way to reduce risk in your retirement portfolio?
Any investment ad worth its weight in gold has a disclaimer, “All investments are subject to risk.” That is because risk is the operative term when it comes to investing. In theory,… Read more
A friend recently had a losing streak at the casino. Instead of walking away, he played more hands of blackjack. “I was determined to win,” he lamented. In fact, he was playing to recoup his losses.
He was a victim of investment biases subconsciously affecting his decision-making. Gambler’s Fallacy – the belief that after a streak of losses his luck would turn – duped him into doubling his losses…. Read more
