Tag

returns

Understanding Monte Carlo

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What is it about a glitzy gambling city on the Mediterranean, known as Monte Carlo, that could possibly diminish or eliminate the gamble we often associate with our lifetime-investing and planning? A second question sheds light on the first. Where do you think all that money comes from to buy all the glitz? The gamblers of course. The ‘House’ at Monte Carlo wins ‘bets’ far more often than the folks coming for the entertainment. The odds favor the HOUSE and Monte Carlo is a shining example of a well-managed house. But even in Monte Carlo, the possibility exists that on

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Would You Like to Outperform 80% of Other Investors?

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The obvious answer to the title question is ‘yes of course,’ but only one in five actually accomplishes it. Here’s the fascinating part – anyone can join the elite 20% any time they wish and outperform 80% of other investors as long as the 80% continues doing what they are doing. By now, it’s widely accepted that most actively managed portfolios, whether mutual funds, private accounts, or hedge funds, fail to beat the benchmarks against which they are measured. Yet most investors continue to chase the goal of market-beating returns, despite the low odds of success.

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Measuring Risk Tolerance Is Not Financial Planning

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Market cycles, bull and bear, have considerably more impact on our psyche, confidence, and outlook than we perhaps realize. When stocks have risen for a period long enough for us to believe the trend will last, things simply look brighter. We feel more confident about our future, loosen our grip on our money, and feel more comfortable taking risk. With the the Total US Stock market up some 200% since March of 2009, we have had numerous discussions around increasing stock exposure to capture larger returns – it’s only normal.

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How Much Of Your Portfolio Will You Spend In Retirement?

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When confronting the question of retirement spending, the most commonly used strategy is known as the 4% Rule.  It is based on the premise that you can withdraw 4% from a well-diversified, balanced (60% equity/40% bond) portfolio and feel comfortable that your money will last as long as you do. For example, if you determined that you needed $40k in addition to social security for retirement spending, the 4% Rule would suggest that you’d need to start with a $1M dollar portfolio. While this may be a decent rule of thumb and an easy way to plan for retirement on a cocktail napkin recent studies

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Persistence

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Persistence, defined as “continuing without change in function or structure,” can be a remarkably good force in our lives or a devastatingly bad one; depending upon our track. What we persist in, we generally accomplish; good or bad.

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Money Goes Where It’s Treated Best

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Over long periods of time the stock market outperforms bonds by a substantial margin.  But, it should come as no surprise that bonds were the winners over the past two years.  In fact, bonds have outperformed the S&P 500 by a 60% premium, the strongest difference in seventy years (1931 and 1932).  Tom Galvin of Credit Suisse First Boston notes that the year following the strong bond performance, stocks posted a 54% return in 1933 as the cycle reversed.  A similar story of good treasury returns during two consecutive bad years for equities came during 1973 and 1974.  That period

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