Investing - In One Sentence And In Many: Asset Allocation Daily
By SA For FAs :
Aging Bull Market?
The market punditry is getting bored with the current story involving steady growth, improved earnings, and lack of oomph in stocks. But investors need to beware and critically assess journalists' unsupported assertions that have a plausible, even convincing ring to them. ( Jeff Miller )
Over the nearly quarter century dataset, small-cap stocks have outperformed [the S&P 500] by 157 bps per year, a nearly 47% cumulative outperformance over this time horizon... The S&P 600 has bested the S&P 500 by 674 bps over the first six months of the year. ( Ploutos )
Compelling short-dated yields, attractive value in emerging markets, and the first stirrings of volatility in Europe taken together are starting to create meaningful fixed-income opportunities for investors. ( Neuberger Berman )
"The emerging markets sell-off has continued in recent weeks, as the U.S. dollar remains strong amid domestic economic data that supports a case for higher U.S. interest rates. Many emerging markets local currencies have been severely impacted." ( VanEck )
"The Atlanta Fed revised down their second-quarter GDP forecast to 3.8% quarter over quarter from 4.8% a few weeks ago. The New York Fed GDP forecast is much lower at 2.8%. More downward revisions are likely due to overestimated consumption figures." ( Eric Basmajian )
Cost vs. Value
"If you want your clients to completely appreciate the value of the advice you provide, make sure the benefits of your advice are as clear to clients as the costs are." ( Vanguard )
"Think your Social Security is safe? Think again. Those benefits you're collecting may have been badly miscalculated by a government agency that can't shoot straight. And when it eventually discovers its mistake, you get to own it. Ask the system's latest victim - orphaned 6-year-old, Dylan Youngblood, who Social Security is suing to recover benefits it mistakenly paid Dylan when his mom was killed." ( Laurence Kotlikoff )
Medicare is not free; indeed, it is likely to cost more than your health insurance plan, especially for high-income earners. If you're getting close to retirement, it is worthwhile to know some of the "money traps" to avoid in selecting Medicare and Medigap plans. ( Tipswatch )
Keep It Simple
A recent profile of investing notable Cliff Asness includes a number of his quotes, including this one: "The rules are quite simple: Diversify. Rebalance. Keep costs low. There aren't many others. But no one writes that book because it's three pages." ( Roger Nusbaum )
Thought for the Day
The Roger Nusbaum article linked immediately above offers glimpses into the wisdom of the famous investor Cliff Asness, along with Roger's astute commentary. You will very likely gain something by reading the article and its commentary. I especially appreciate that first quote (see above) suggesting that the key principles of investing could be contained in a three-page book. I basically agree with that, though strictly speaking one doesn't need quite so many pages.
Five years ago, University of Chicago social scientist Howard Pollack famously mentioned that all you need to know about finance could be written on an index card . When challenged by a member of the audience, he grabbed a pen and an index card and wrote his key ideas in three minutes. But Asness was right in his quote above about the part that "no one writes that book because it's three pages." Pollack proved that when he eventually put his index card into book form and the result was a 256-page volume, which maintained the charming title " The Index Card: Why Personal Finance Doesn't Have to be Complicated ."
Having already well exceeded the limit of an index card myself, I must plead guilty to a habitual excess of verbiage. In truth, I believe an index card is far more space than you really need. In a single word, you could write "diversify." Or you could elaborate on investing by using eight words that might stick a little better, such as "Don't put all your eggs in one basket." But as everything comes down to implementation details, there remains some room for expansion. So, I usually express this idea via my recommendation that investors hold stocks, real estate, and cash in roughly equal measure.
So why do I and others go on ad nauseam ? The reasons differ. Some people want to attract business by keeping their names out there; some want to feel important by keeping their names out there; some (academics) are seeking tenure and others grants. Some just want to help others. For most, probably, it's a combination of some of these and other motivations.
In truth, there is a limitless amount of commentary possible on any subject. Speaking personally, I hope to be as helpful as I can in commenting on various issues, but I don't kid myself: The index-card version is the most important. Not everybody needs or wants to get into the weeds. So it behooves everybody, whatever your area of expertise, to have an index-card (or less) version of your profession's key insights. For a doctor that would probably be: "Don't overeat, and exercise." The rest is commentary. For a historian: "The issues we face never change; the circumstances always do." The rest is commentary. Similarly, in the financial realm: "Spend less than you earn, and put the difference in diversified investments." The rest is commentary.
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