Asset Allocation Step 2: Break Down Equities and Bonds

Monday, April 12, 2010   

After spending some time getting to know your risk profile (Asset Allocation Step 1), you should have a much better idea of an appropriate equity/bond split for your portfolio.  Now we can move on to the second step of the asset allocation process: breaking down the equity and bond portions of your portfolio.  […]

Posted by George | Asset Allocation | Comments (0)

Asset Allocation Step 1: Determine Your Risk Profile

Thursday, April 8, 2010   

Choosing an asset allocation, or the mix of stocks, bonds and cash in your portfolio, is probably the most important investment decision that you’ll make.  A study by Ibbotson Associates concluded that asset allocation decisions determine about 100 percent of investment performance for those who follow a low-cost, long-term investing strategy.  Similarly, when investors underperform the market, the primary culprit is a failure to maintain one’s allocation during tough times.   […]

Posted by George | Asset Allocation | Comments (0)

Index Funds vs. Commission-Free ETFs

Tuesday, April 6, 2010   

I love index funds.  Their low costs have historically translated into high returns, they greatly simplify the difficult task of portfolio management, and they perfectly complement a disciplined, long-term investing approach.  Do-it-yourself investors can’t go wrong with a risk-appropriate portfolio of low-cost index funds, and Vanguard is still the only one-stop shop when it comes to building an index fund portfolio.  Index funds form the backbone of every portfolio recommendation on 

That being said, recent developments in the Exchange-Traded Fund (ETF) marketplace are causing index investors to re-examine the case for ETFs.  […]

Posted by George | Index Funds & ETFs | Comments (0)

REITs Belong in Your Investment Portfolio

Thursday, April 1, 2010   

Real Estate Investment Trusts (REITs) were created by Congress in 1960 so that the general public would have access to income-producing real estate investments.  Today, REITs account for more than $250 Billion of US equity investments, or 1-2% of the public market, having doubled their market capitalization over the past decade.  These securities are appealing because of their unique structure, historical risk-adjusted returns, and significant diversification benefit.  Long-term investors should seriously consider adding REITs to their asset allocation plans.  […]

Posted by George | Asset Allocation | Comments (0)

Nondeductible IRAs – Are They Worth the Effort?

Tuesday, March 30, 2010   

April 15 isn’t just the deadline for filing your taxes; it’s also the last day that you can make a 2009 IRA contribution.  With that in mind, I thought it might be helpful to talk about the circumstances under which you should consider funding a Nondeductible IRA.  […]

Posted by George | IRAs & 401(k)s | Comments (0)

Investment Policy Statements – Bad Behavior Defense

Thursday, March 25, 2010   

I recently discussed several of the return-reducing psychological traps that plague do-it-yourself investors.  Well, that was the bad news.  Fortunately, we have a powerful weapon in the fight against harmful behavioral biases:  The Investment Policy Statement (IPS).  This document formally outlines the investment objectives, philosophy, boundaries and procedures for managing your portfolio so that you can avoid making impulsive, biased decisions.   […]

Posted by George | DIY Investing | Comments (0)

Psychology and Investing – Common Behavioral Biases

Tuesday, March 23, 2010   

Legendary investor Benjamin Graham said, “The investor’s chief problem – and even his worst enemy – is likely to be himself.”  After decades of research on individual investor behavior, few would argue with Mr. Graham’s hypothesis.  When unchecked, the same natural human tendencies that allow us to function, and even succeed, in our daily lives, can wreak havoc on our investment portfolios.  […]

Posted by George | DIY Investing | Comments (0)

Making the Most of Bad 401(k) Choices

Thursday, March 18, 2010   

In 1978, Congress added section 401(k) to the Internal Revenue Code in order to give employees a tax break on deferred compensation.  Today, the 401(k) is the most popular retirement savings vehicle in America.  Employer matches, tax-deferred growth, and relatively high contribution limits ($16,500 in 2010, $22,000 if you’re 50 or older) make these plans extremely appealing.  Unfortunately, not all 401(k)’s were created equal.  […]

Posted by George | IRAs & 401(k)s | Comments (0)

Portfolio Rebalancing – It’s Never Too Late

Monday, March 15, 2010   

You’ve probably heard about the benefits of rebalancing your investment portfolio: it keeps your asset allocation consistent with your risk profile, it has the potential to boost your returns, and it enforces good investing habits (buying low and selling high).  Still, it’s a chore, and one that can fall by the wayside at a time of year when you’d rather be preparing for warm weather activities.  […]

Posted by George | DIY Investing | Comments (0)

Morningstar Instant X-Ray – Three Ways to Use the Output

Thursday, March 11, 2010   

After meticulously entering your portfolio holdings into Morningstar’s free Instant X-Ray Tool, you should have a clear view of your overall asset allocation, broken down by style and region.  Now what?  Let’s discuss three important questions that you can answer using the tool’s output.  […]

Posted by George | DIY Investing | Comments (0)
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