How to Keep Headlines From Driving Your Portfolio Decisions

On behalf of everyone at AAII, I want to say thank you to all of you who have served or are currently serving in the military. The stock market will be open Friday, Veterans Day, but banks and government offices will be closed. Big, unexpected events commonly trigger strong emotional reactions. The wiring in our…

 

Too Much Confidence Is Bad for Your Portfolio

Higher levels of confidence about one’s ability to invest lead to worse returns. I realize that this may seem counterintuitive to some of you, but this is the conclusion of a study accepted by the Journal of Behavioral and Experimental Finance (an earlier version of the study is available on SSRN). It’s yet another example of…

 

Jeopardy! Shows Humans Don’t Maximize Profits

One of the common behavioral biases is anchoring. Anchoring is basing expectations and viewpoints on previous, often recent, information. An example would be the yield on the 10-year Treasury note. The benchmark bond yielded 1.59% today. If it were to rise over the short term to, say, 2.0%, your opinion would likely be that rates…

 

Where Is the Bond Armageddon?

On Wednesday, The Wall Street Journal published an article headlined, “Rock-Bottom Bond Yields in Europe Hit All-Time Lows.” Thursday morning, a headline on The Financial Times’ website declared: “Relentless: Bund Yields Take Fresh Step Down.” The headlines were written in reaction to what is occurring in global bond markets. Earlier today, yields on the 10-year…

 

Don’t Be Quick to Sell (or Rotate) in May

This week marks the start of what the Stock Trader’s Almanac refers to as the “worst six months” for the stock market. Relative to the “best six months,” stocks historically underperform during the period of May through October. Underperformance, however, should not be confused with losing money. Sam Stovall, the U.S. equity strategist at S&P…

 

A Gold Fund’s Debacle Highlights Risks

Any time a fund invests in something more esoteric than exchange-listed stocks from a developed country or widely traded high-quality bonds, the potential for something to go wrong increases. We saw this happen in December when the Third Avenue Focused Credit Fund—a mutual fund—suddenly shut its doors in response to junk bond losses. Last week…

 

Fees on Mutual Funds Could Get Cheaper

There is some good news for investors: The war on expenses is continuing. Vanguard recently filed with the Securities and Exchange Commission (SEC) to launch two funds with total annual operating expenses of 0.01%. That is not a typo; the expense ratio was copied and pasted directly from the SEC filing. How cheap is 0.01%?…

 

AAII Investor Update: Protecting Your Digital Assets

A part of the process for managing your finances that is easy to overlook is protecting your digital assets. Not your online persona (e.g., “Fly Fishing Bill”), but your records, statements, passwords, etc. Computer viruses, malware and identity theft are certainly concerns to take action on, but so is protecting your files containing your financial…