A common error made by many bond investors is to avoid purchasing premium bonds – bonds that trade above their face value (or par, typically 100). A bond will trade at a premium when the coupon (stated) yield is above the current market rate for a similar bond of the same remaining term to maturity….
More than three years ago, the bond “king,” PIMCO’s Bill Gross, announced that the world’s biggest bond fund had reduced its U.S. government-related debt holdings from 22 percent in December 2010 to just 12 percent in January 2011, at that time its lowest level in two years. Shortly thereafter, PIMCO announced it had entirely eliminated…
One of the secrets to being a successful investor is the ability to keep your head during a bear market while everyone else around you is losing theirs. To do that, you have to understand that bad news doesn’t necessarily mean stock prices will fall. While this may sound strange, it’s important to understand that…
Neal Merbaum Meet Ben, the CEO of a fictional company. One day, he calls his employees into a conference room for a meeting and starts to assign tasks. “Mark, start typing a letter. Marge, create a spreadsheet. Frank, organize a team.” And so on. But Ben doesn’t tell anyone why they’re doing these things or…
One of the more persistent investment myths is that it is a winning strategy to sell stocks in May and then wait to buy back into the market around November. The oft-repeated catch phrase is, “Sell in May and go away.” Well, this year if you sold your stocks in May, you would probably have…
In February 2012, a group of experienced skiers headed into the backcountry near the Stevens Pass resort in Washington State to look for untracked powder. It was a beautiful day, and everyone expected to have a great time skiing the popular Tunnel Creek section. Minutes after the first skiers began heading down the…
How many times have you had a conversation when you or the other person said something like: “I’m so worried about the stock market.” “I’m so worried about retirement.” “I’m so worried about the value of my home.” Assuming you have said or heard a derivation of one of these statements, ask yourself a big…
Throughout the course of my career, I’ve heard a lot of financial horror stories. The majority of these stories are told by baby boomers whose aggressive stock market strategies went bust, often at the behest of a transaction-oriented “advisor.” The most pain—yes, even marginally greater than that of former Enron employees and Bernie Madoff scam…
Recently, an adviser told me how one of his clients was scammed out of hundreds of thousands of dollars by his son. Let’s call the client “Bill,” the son “Robert,” the adviser “Phil” and the advisory firm “Registered.” Phil works on a team at Registered with another wealth adviser and a portfolio manager. All three interact…
In 2006, I wrote The Smartest Investment Book You’ll Ever Read. Prior to that time, many investment books were long and mind-numbing, filled with charts, and intended to make investing so complex that readers would be incentivized to consult with the author or other financial experts. Smartest Investment broke the mold. It was short and pithy. It…
A recent article by Motley Fool took dead aim at the cost of working with a financial advisor. The title says it all: “The Invisible and Brutal Cost of Using a Financial Advisor.” The premise of the article can be summarized as follows: 1. A hypothetical advisory fee of 1 percent of assets per year significantly reduces…
Few can forget the iconic phrase in the movie “Jerry Maguire,” when Tom Cruise says, “Show me the money!” Here’s a similar mantra that will change the way you invest: “Show me the evidence!” A cursory review of what passes for “financial advice” demonstrates the importance of following this mantra. Here’s a sampling: Pimco’s advice. Virginie…
An overwhelming body of evidence demonstrates that the majority of investors would be better off if they adopted indexed investment strategies. And while a total-stock-market index is fine for many investors, indexed investors who desire certain types of exposure face a number of problems. These problems can be addressed with what I call “structured portfolios.”…
Today concludes our discussion on international stocks and whether investors should consider them in their portfolios. Negative tracking error has resulted in my receiving an increasing amount of calls questioning the wisdom of investing in international stocks. To help you avoid making the mistake of recency, here are two questions to ask yourself: First: While…
Today begins a two-part series on investing in international stocks. Over the past four years, international investments have done poorly relative to domestic investments. For example, from 2010 through 2013, while the S&P 500 Index returned 15.9 percent per year, the MSCI EAFE Index returned just 8.6 percent per year, and the MSCI Emerging Markets…