Your money is like a bar of soap, the more you handle it, the less you’ll have.” --Eugene Fama, Nobel winning economist from Malden
What type of investor are you? This short video from Investing Made Simple explains what it means to be an Active Investor vs. a Passive Investor and illustrates the pros and cons of both.
Savvy planners focus most of their time and attention on managing things they can know and control, and work hard to filter much of the noise associated with investing. At TWM we've developed the acronym “ADEPPTS” to help you focus on managing:...
Experts and pundits are notoriously bad at forecasting, in part because they aren't punished for bad predictions. Also, they tend to be deeply unscientific. Moreover, most of us engage in constant forecasting without even realizing it, and that can have an important impact on the way we think about investments. This podcast from Freakonomics Radio will help you rethink the subconscious ways in which we all take forecasting risk. The psychologist Philip Tetlock is finally turning prediction into a science -- and now even you could become a super forecaster.
Do you understand what diversification does for your portfolio? While people generally know diversification is a good thing, they’re often not sure exactly how or why. Academic research has shown that investors don’t understand diversification's impact on volatility and expected returns.
Commodities and Emerging Markets have performed poorly in the last few years. Should you sell low?
While it would be fun to hold a Portfolio in which all of the asset classes were going up at the same time, it would be a nightmare if they were all moving down at once.
To protect against epic losses, investors seek uncorrelated returns — asset classes that behave dissimilarly so that a portfolio’s ingredients don’t all move in the same direction at the same time.
But diversified portfolios should be built with the knowledge that including uncorrelated assets means always having to endure pain in part of the portfolio. That part will be going down or remaining flat, since it tends to move differently from the uncorrelated part that is going up.
When you weigh risk, you are attempting to predict future outcomes without knowing whether the results you expect will actually occur. With recent market volatility stemming from a myriad of issues, it may sometimes seem impossible to accurately foresee which risks will have the most impact. More than ever before, it is important to understand the nature of risk, how it affects you and your money, and what you can do to manage it.
By rethinking risk, you can set yourself up at the top of the food chain to beat the sharks at their own game and capture your share of investment returns.
Portfolio rebalancing is like a tune-up for your car: it allows individuals to keep their risk level in check and minimize risk.
It also helps you to take advantage of differences in performance among investments in a diversified account by buying low and selling high. This article explains why rebalancing is important. For those participants not invested in a Target Risk Model Portfolio, it explains how to set up automatic rebalancing for your account at Ascensus.
The good news is that 401(k) contributions have increased, according to Fidelity Investments’ most recent quarterly retirement savings analysis based on data from the 401(k) and individual retirement accounts (IRAs) it manages. The bad news is one glaring problem for Baby Boomers; the asset allocation of their 401(k)s is drastically out of balance.
The famous marshmallow test conducted in the 1960's showed that we have a hard time resisting instant gratification, even if we know that delaying gratification would lead to an even bigger reward. This, in short, is what makes investing and managing businesses so hard. Success requires many qualities, but conviction, discipline and thinking long-term must rank near the top....
Be honest: How often do you really think about your retirement savings? Or maybe the better question is: How often do you actually do something to grow that nest egg?
Here's a great article from Sunday’s New York Times about one of the key points we talked about in your plan's educational seminar. Why does the average fund investor underperform market indexes so badly? What can you do to close the performance gap?