Finding Value and Financial Strength Based on “What Works on Wall Street”
Posted on April 16, 2014 | AAII Journal
Investors seem to be programmed by nature to fail at investing, pouring money into last year’s hot stock, industry or asset class.
James P. O’Shaughnessy provides a detailed examination of investment strategies in the fourth edition of his book “What Works on Wall Street: The Classic Guide to the Best-Performing Investment Strategies of All Time” (McGraw-Hill, 2011).
O’Shaughnessy argues that the majority of investors fail to beat market averages because they do not follow a disciplined approach to investing. Instead, investors let the emotions surrounding the market overpower their judgment and push them off their planned investment course. Investors tend to chase investments with the best recent performance, while ignoring anything that happened more than three to five years ago. Furthermore, O’Shaughnessy makes the case that the markets are not random. The stock market does not move around without any rhyme or reason; it “rewards certain investment strategies while punishing others.”
Reduce Stock Exposure in Retirement, or Gradually Increase It?
Posted on April 4, 2014 | AAII Journal
For the past 20 years—due to the growing research on safe withdrawal rates, the adoption of Monte Carlo analysis (a method of considering many simulations), and just a difficult period of market returns—there has been an increasing awareness of the importance and impact of market volatility on a retiree’s portfolio.
Building an All-ETF Subset From the Model Fund Portfolio
Posted on January 21, 2014 | AAII Journal
Over the past three months the stock market has continued its upward climb despite the dangers on the horizon.
The Model Fund Portfolio is up 17.4% year-to-date but lags the S&P 500 index as measured by Vanguard 500 Index fund (VFINX), which is up 19.7%. As we mentioned previously, the lower return is largely due to our two holdings that provide diversification—Fidelity Capital & Income fund (FAGIX) and Vanguard REIT Index ETF (VNQ).
Figure 1 and Table 2 show performance figures over the long term for the portfolio, the index comparison and the Conservative Portfolio, which is 75% Model Fund Portfolio and 25% iShares Barclays 1-3 Year Treasury ETF (SHY).
Table 1 shows the current holdings for the Model Fund Portfolio. There are no portfolio changes at this time.
Our change from WisdomTree Emerging Markets SmallCap Dividend ETF (DGS) to iShares MSCI Frontier 100 ETF (FM) proved timely but the area of frontier markets is still new. We will feel more confident when there are longer-term results. We particularly would like to see how frontier markets perform in a down market.
Retirement Withdrawals: Can You Base Them on RMDs?
Posted on January 17, 2014 | AAII Journal
The IRS’s required minimum distributions are easy to follow and with a little modification can set the basis for a more optimal withdrawal strategy.
Lump Sum or Annuity: Which Should You Choose at Retirement?
Posted on January 16, 2014 | AAII Journal
An annuity is attractive if you expect to live beyond normal life expectancy, but a lump sum may be better if you have other sources of income.
Determining How Much to Allocate to Each Investment
Posted on January 15, 2014 | AAII Journal
Allocate by the percentage of portfolio dollars, not by the number of shares.
The Role of REITs for Long-Term Investors
Posted on December 26, 2013 | AAII Journal
Real estate investment trusts (REITs) offer diversification benefits relative to stocks, with correlations decreasing over time.
THE December 2013 ISSUE OF THE AAII JOURNAL IS NOW AVAILABLE ON-LINE
Posted on December 3, 2013 | AAII Journal
Cover Articles: The Individual Investor’s Guide to Personal Tax Planning 2013
Posted on November 5, 2013 | AAII Journal
A look at what’s in the November 2013 AAII Journal.
Social Security Strategies for Singles
Posted on November 3, 2013 | AAII Journal
The optimal age for a single individual claiming benefits depends on life expectancy and the need to extend a retirement portfolio’s longevity.