Shaping Up Your Bond Portfolio With Barbells and Ladders

A key to bond management is reducing both reinvestment rate risk and price risk. Two strategies allow for this—while keeping a passive portfolio management approach. Risks involved in bond investing can be measured using the duration concept: Duration provides a measure for reinvestment rate risk and price risk, and investors can minimize both of these…

 

Fund Investors’ Biggest Mistakes and How You Can Avoid Them

Understanding how different investments work is the first step toward profitable investing. The second is making sure you—and your mutual fund manager—always maintain the correct wealth-building mindset. To become the best possible investor you can, it is imperative to avoid the big mistakes. Behavioral finance researchers investigate how human beings study and act on investment…

 

Options: The Concept of Equivalent Strategies

Naked put selling is equivalent to covered call writing in terms of where and how profits and losses are incurred. But it can be advantageous in terms of cost savings and potential reward. Talk to an investor who is involved in a covered call writing program about his doing some naked put selling instead and…

 

Defining Yield: A Word of Many Meanings

The term “yield” is thrown about often by the financial press and others. The trouble is that yield has many different meanings and implications for investors. This article will try and sort out some of the major differences. It will not, however, attempt to present mathematically all of the possible yield calculations created by institutions…

 

The Index Fund Approach: Tracking the Market

The goal of many individual investors is to beat the market. A large number, however, don’t—particularly when the costs of trying to do so are considered. One alternative is to apply the old adage, “If you can’t beat ’em, join ’em.” The index fund concept allows investors to do just that. A portfolio of stocks…

 

Valuing Growth Stocks

If you pay too much for a stock, your return on investment won’t be satisfactory. In the AAII world of Shadow Stocks—companies with some history of growth, little or no dividend yield and a small amount of the stock outstanding owned by institutions—you hope to profit mainly through appreciation in the price. You expect that…

 

Who Gets a Dividend Payment After a Trade?

Companies distribute cash dividends to their shareholders at the discretion of the board of directors. The board of directors examines the business prospects, cash generation and cash needs to determine if they can afford to make a distribution of profit in the form of a cash dividend and how large a distribution to make. Most…

 

Beyond the Numbers: Getting to Know a Manager

Performance statistics are probably the single most scrutinized feature of any stock mutual fund. These figures are, of course, important indicators of how well a portfolio manager has performed in the past. As such, they can serve as useful flags of a possibly good manager or a possibly bad manager. But the question facing any…

 

The February 2018 AAII Journal is Now Available Online

Feature Article » The Individual Investor’s Guide to the Top Mutual Funds 2018 by AAII Staff Our annual mutual fund guide provides information and performance statistics on nearly 1,600 funds on AAII.com.   Departments » Briefly Noted Current news items of interest to individual investors. Retirement Doesn’t Negatively Impact Health Prioritizing HSA Contributions and 401(k)…

 

Mistakes Must Serve a Purpose: Some Early Lessons

Experience is that marvelous thing that enables you to recognize a mistake … when you make it again. —Franklin P. Jones It is not that easy to talk about one’s mistakes. In the early days of Tocqueville Asset Management, I suggested that the senior partners jointly write a report about their most memorable investment mistakes…