What Are Your Actual Returns?

There was some good discussion on my post from last week about the return numbers on the S&P 500 from 1934-1953 (see Stock Market Losses With Low Interest Rates). A reader made the comment that it was unrealistic to use S&P 500 returns from that time because there were no index funds in existence back…

The Impact of the Tech Bubble on Future Returns

One of the most interesting aspects of asset bubbles is that they pull returns forward from future years. Or on the flipside, they lead to lower returns for a number of years when you invest closer to the peak. The NASDAQ was down 80% after the tech bubble burst following the nearly 500% performance during…

Placing Constraints On Yourself

A few weeks ago I wrote about The Psychology of Sitting in Cash and a reader left a great comment about how he has tried to solve this problem in his own portfolio using the financial crisis as an example:

Rebalancing With Required Minimum Distributions

One of the most heavily debated topics in retirement planning is figuring out the safe withdrawal rate. The general rule of thumb is 4% of your portfolio, but if you have the bulk of your assets in tax-deferred accounts such as a 401(k) or IRA, the government makes it easier on retirees to figure out…

Can People Really Change Their Financial Behavior?

I’ve been writing a lot lately about personal finances because it seems like every week another report comes out showing how ill-prepared people are when it comes to their financial situation. My friend James Osborne asked me if I really think people can be taught to live within their means. I do think it’s possible,…

Wall Street Is Not Going Down Without a Fight

Just when I think things are slowly turning in favor of the financial consumer, I’m reminded of Wall Street’s old ways of doing things like putting fees, profits and margins ahead of client interests. There were three things I saw this week that showed Wall Street’s old guard isn’t going to go down without a…

Three Misconceptions About Risk Management

“Risk is the permanent loss of capital, never a number.” – James Montier Risk management is something every investor realized they needed following the 2007-2009 financial crisis. The same thing will happen when the next bear market hits. But too many investors learn the wrong lessons or take misguided advice about how to approach risk….

Lefty’s Placebo Effect

Like many I watched the Master’s golf tournament this past weekend. On Saturday, Phil Mickelson finished the day five under par to set himself up in third place going into the final round. For some reason, in Mickelson’s post-round interview, the CBS analyst asked Phil what his wardrobe plans were for the next day. Mickelson said he…

Stock Market Losses With Low Interest Rates

One of the common misconceptions I’m starting to hear from investors is that because we’re in a low interest rate environment, stocks either can’t or won’t fall very far from these levels. This is the TINA (there is no alternative) argument that says because over the longer-term bonds returns will be much lower from today’s…