cash

3 Diversification Errors

Portfolio diversification is an investment strategy designed to limit risk by spreading money across multiple asset classes and securities. Most financial literature along with your local financial advisor will agree that diversifying your investments is a prudent thing. But while diversification may seem like a straightforward process, it isn’t. And some investors and their advisors …

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5 Building Blocks for Your Investment Portfolio

The difference between well-built and poorly designed buildings can be strikingly drastic. Take for example, I.M. Pei, the Chinese-American architect, who is a legend in his profession and has won many prestigious awards, including the Pritzker Prize. Among all the illustrious structures he’s designed, the Rock and Roll Hall of Fame in Cleveland, OH is the …

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Factors that Should Influence Your Investments

If you asked a thousand different people about the key factors that should drive their investment choices, you’re bound to get a thousand different answers. Some, for example, might be inclined to argue that U.S. stocks (NYSEARCA:SCHB) have increased for eight consecutive years and there’s no reason to make any portfolio changes because stock prices …

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Are You Still Investing Without a Margin of Safety?

In retrospect, Brexit turned out to be more meaningful than Grexit. And while the immediate reaction of global financial markets (NYSEARCA:VT) to the England’s decisive vote to leave the European Union (EU) was negative, it’s a stark reminder of why investing without a margin of safety is negligent. With the exception of precious metals (NYSEARCA:GLTR), mining …

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If You’re Not Preventing Stock Market Losses, You Better Start Now

What’s more important? Making gains in the stock market or preventing losses? Before answering that question, let’s list a few common fallacies about risk: • The full spectrum of market risk can be accurately defined in a single magic formula or statistic • Long-term investing always guarantees success, so go ahead and take all the …

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4 Signs Your Portfolio Isn’t Ready for a Bear Market

In case you didn’t get the memo, global stocks are now in correction mode. And the velocity of the rout has been shocking to seasoned financial pros not to mention the investing masses. For perspective, the three largest U.S. stock benchmarks – the Dow Industrials (NYSEARCA:DIA), Nasdaq-100 (Nasdaq:QQQ), and S&P 500 (NYSEARCA:VOO) are up between …

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A Risky $1.31 Million Portfolio that Flunks on Cost

A few months ago the NASDAQ Composite Index (Nasdaq:ONEQ) eclipsed 5,000 for the first time since March 2000. Put another way, we are all 15 years older since the NASDAQ’s first dance with all-time highs, but are we smarter? What did we learn from the first meltdown that can help us cope with future meltdowns? …

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Portfolio Chart 1

Portfolio Report Card: A $1.23 Million Portfolio Built on the Wrong Foundation

From an observer’s viewpoint, the individual with a good sized investment portfolio (say above $1 million) doesn’t have much to worry about. They’ve got lots of money and that’s all that matters. Unfortunately, this misinformed view isn’t just dead wrong, but it incorrectly presumes the person with a large portfolio has done everything right. Is it true? (AUDIO) Listen …

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Contrarian Investing

Portfolio School: Put Things Where They Belong

People do the darndest things. For example, they put their investments in places where they don’t belong. This is a common problem suffered not just by retail investors, but by experienced professionals who are hired to advise them. In each case, there’s a poor understanding about the basic elements of a well-built portfolio. (In extreme cases, there may be knowledge of …

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Roller Coaster Ride 2

Portfolio Report Card: A Risk Heavy $696,000 Investment Plan

Your investment portfolio is nothing more than a reflection of you. Put another way, it’s a personal statement about how you view risk, taxes, diversification, and investment cost. If you’re negligent in building an investment portfolio that fails to correctly address these key areas, your performance results are likely to suffer. My latest Portfolio Report …

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Wall Street’s Rogue Way for Measuring Performance Apes the 16th Century Medical Field

When measuring the investment performance of a portfolio, the biggest mistakes people make are 1) not tracking performance at all, or 2) comparing a portfolio’s performance to flawed yardsticks. The first point should be self-explanatory, so let’s focus on the second point. If a certain portfolio holds an asset mix of 25% U.S. stocks (NYSEARCA:SCHB), …

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Portfolio diversification

Facts and Fiction about Portfolio Diversification

Let’s examine the facts and fiction about portfolio diversification. Fiction: A 60/40 stock and bond portfolio (Nasdaq:VBMVX) is fully diversified. Fact: Only investment portfolios with market exposure to all the major asset classes –  not just stocks and bonds (NYSEARCA:BND) – but  real estate, commodities, and cash too are fully diversified. That means a 60/40 stock …

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The Crowd Votes for Stocks over Cash

What do investors love and what do they hate? Where are they putting their money? Analyzing the money inflow/outflow data for ETFs gives us some clues. In a study of U.S. ETF flows just published by the SPDR ETFs, David B. Mazza, the Head of Research observed: “Equities drove a disproportionate share of September’s inflows with …

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Warren Buffett is Once Again Doing the Opposite of the Crowd

The disdain for cash is nearly universal. Cash instruments like money market funds are yielding around 0%. And nobody needs or wants cash because stocks are up. The S&P 500 (NYSEARCA:IVV) just rallied 3.8% in August, almost one-third its year-to-date (YTD) gain of 9.73%. AUDIO:  Listen to Ron DeLegge @ The Index Investing Show Performing …

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Portfolio diversification

Should You Be 100% Invested in Stocks?

Investors should have 100% of their money invested in stocks! That’s what Laurence Fink, the chief executive officer at BlackRock declared in 2012. Since then, the S&P 500 (NYSEARCA:IVV) has broken above record levels and is now 43% higher compared to a -1.4% loss for the total U.S. bond market (NYSEARCA:BND). While Fink’s advice looks smart …

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Falling Bricks

A $725,000 Portfolio on Shaky Ground

Having a six or seven figure sized investment portfolio doesn’t automatically make it smart. Such is the case with a $725,000 investment portfolio that I recently graded. An investment Portfolio Report Card request was made to me by a mid-40s software engineer who described himself as an “aggressive investor.” Software is a pretty aggressive business and …

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Why Do So Many Investors Self-Destruct?

“The investor’s chief problem—and even his worst enemy—is likely to be himself,” once quipped the great Benjamin Graham. The truth of Graham’s observation is seen in the consistent pattern of mutual fund investors to self-destruct. AUDIO: Listen to Ron DeLegge @ The Index Investing Show Over the past 30 years, the typical stock mutual fund investor’s performance has …

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A Portfolio Strategy Warren Buffett Would Approve

What are the attributes of a world-class investment portfolio that even Warren Buffett would bless? Buffett’s 2013 letter to Berkshire Hathaway shareholders gives us a clue: “The ‘know-nothing’ investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results. Indeed, the unsophisticated investor who is realistic about his shortcomings is …

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Beating the Dividend Income Drought

Will dividend yields test 1999 lows? That was the title of my post from a few weeks ago in which I explained to readers how the dividend income drought facing investors continues into 2014. Interestingly, the Federal Reserve’s initiation of ZIRP (zero interest rate policy) on Dec. 16, 2008 wasn’t the beginning of the bear …

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3 Big Shortcomings of Target Date Funds

Around 41% of all 401(k) savers have are using target-date mutual funds (TDFs) and the numbers keep rising. Experts in the financial services industry applaud this trend, but are target-date funds really the panacea to a secure retirement income? TDFs attempt to match a person’s age and risk tolerance with a projected retirement date. For …

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