Tag Archives: Investing

7 Rules for Wealth: #4 Retirement Cost-Cutting

Posted on by

Are you paying 1% for portfolio management? Why?

You want to be invested in a collection of index funds with an average expense ratio no worse than 0.1%. That’s easy to do. Fidelity has index mutual funds with 0% fees. Or you could easily put together a small, well-balanced assortment of exchange-traded funds costing 0.03% to 0.06%. (Check out the Forbes Best ETFs for Investors ranking.)

Or you could put all your money in the Vanguard Balanced Index Fund at 0.07%.
— Read on www.forbes.com/sites/baldwin/2020/01/04/7-rules-for-wealth-4-retirement-cost-cutting/

2020 Investment Outlook

Posted on by

Investors should expect heightened market volatility in 2020. History tells us that it’s not uncommon for three to four large-cap equity stock market pullbacks of at least 5% to occur each year and market corrections of at least 10% can occur every year. As a result, it may be prudent for investors to position their stock portfolios away from higher-risk asset classes for safer asset classes.

Portfolio Guidance:

  • Cash has an important place in a portfolio as a volatility dampener and a source of funds.
  • Focus on higher quality assets.
  • Go beyond traditional fixed income for yield. Investors may consider equity dividends as another source of income.
  • Defense can be a good offense. Given expectations for market volatility, suggest reducing exposure to riskier assets.
  • Focus on longer-term diversification, as shorter periods are likely to be more volatile

Cash Flow Analysis in Retirement

Posted on by

Adding up all the money coming in and going out is called cash flow analysis, and it looks at all income from investments, properties, work, or anywhere else. And it looks at spending.

When it comes to cash flow, there are no hard and fast rules about what is good—it depends on personal goals and values. But there are some general guidelines to be consider.

  • Try to start early and save at least 15% of income for retirement—and any employer matching counts toward this goal.
  • Retirees should try to limit withdrawals from their savings to about 4% of their account balance in the year they entered retirement, though they can increase that for inflation each year.
  • Limit your monthly essential bills and housing costs to 50% of your monthly income.
  • Save about 5% of your income for short-term expenses.
  • Look to keep your total monthly debt bills below 36% of your monthly income.
  • Consider a growth portfolio consisting of (70% stocks, 25% bonds, and 5% cash) that would have allowed a retiree to withdraw more than 7% each year over 25 years of retirement—over 25% more than a conservative portfolio (20% stocks, 50% bonds, and 30% cash) with a sustainable withdrawal rate of 5.7%.3

Cash flow analysis may also show some opportunities for tax savings and other ways to make the most of one’s money.

Source: Financial health: Know your vital signs, FIDELITY VIEWPOINTS, 09/30/2019
3. The chart, “More stocks may mean higher anticipated withdrawal rates, but with less certainty,” was created based on simulations that relied on historical market data. The historical range analyzed was January 1926 to July 2018. These simulations take into account the volatility that a variety of asset allocations might experience under different market conditions. The illustration compares 3 different hypothetical portfolios—conservative, with 20% stocks, 50% bonds, and 30% cash; balanced, with 50% stocks, 40% bonds, and 10% cash; and growth, with 70% stocks, 25% bonds, and 5% cash. For each of the hypothetical portfolios, the maximum withdrawal rate was calculated such that the portfolios do not run out of money in 99%, 90%, and 50%, respectively, of the hypothetical scenarios. See footnote 4 for more information on asset classes and historical returns.

Burton Malkiel says his passive investing idea was called ‘garbage’ | CNBC

Posted on by
  • Burton Malkiel said an early review of his famous book blasted his ideas about passive investing.
  • Malkiel’s book, published in 1973, influenced the thinking of many industry leaders who pioneered index funds, including Vanguard’s Jack Bogle.
  • Malkiel said there are still not enough investors taking advantage of passive strategies.

Investing is a method of purchasing assets to gain profit in the form of reasonably predictable income like dividends, interest, or rentals, and appreciation over the long term. Investing involves time period for the investment return and predictability of the returns.

Burton Malkiel, author of “A Random Walk Down Wall Street,” said the investment community thought his passive investing idea was “ridiculous,” Burton Malkiel said an early review of his famous book blasted his ideas about passive investing.

Malkiel’s book, published in 1973, influenced the thinking of many industry leaders who pioneered index funds, including Vanguard’s Jack Bogle. Malkiel said there are still not enough investors taking advantage of passive strategies.

The father of passive investing told CNBC on Thursday that the shift toward index funds has vindicated his ideas and that there is still too much active management. According to Malkiel, passive investing has outperformed ninety percent of active investing over a fifteen year period.

Burton Malkiel is an emeritus professor of economics at Princeton University and author of the famous investing book, “A Random Walk Down Wall Street.” He said on CNBC’s “Squawk on the Street” that his idea that most investors should invest passively was originally met with ridicule.

He believes that each investment has a firm anchor of something called intrinsic value. It means that when market prices fall down, a buying or selling opportunity arises. The theory of Investment Value determines the intrinsic value of stock and then use the concept of discounting in the process.

He also believes that discounting basically involves looking at the income backward rather than seeing how much money an investor has in the next year; an investor looks at the money expected in the future and see how much less it is currently worth. Intrinsic value of a stock is equal to the present or discounted value of all its future dividends.

Burton G. Malkiel is the Chemical Bank Chairman’s Professor of Economics Emeritus at Princeton University. He is a former member of the Council of Economic Advisers, dean of the Yale School of Management, and has served on the boards of several major corporations, including Vanguard and Prudential Financial. He is the chief investment officer of Wealthfront.

— Read on www.cnbc.com/2020/01/02/burton-malkiel-says-his-passive-investing-idea-was-called-garbage.html

3 moves for catching up on retirement savings | MassMutual

Posted on by

In order to have a decent shot at maintaining your standard of living in retirement, you should have six to nine times your salary tucked away in a 401(k) or other savings accounts by your mid-50s to early 60s.

“That’s as good a general rule of thumb as any, but most people don’t come close to that, and some don’t have anything saved,” said retirement expert Mary Beth Franklin, a Certified Financial Planner® and contributing editor at InvestmentNews, in an interview.

Indeed, in a 2014 national poll conducted by Bankrate, more than a quarter of survey respondents aged 50 to 64 said they had not started saving for retirement.1

Granted, it’s never too late to start saving for retirement, but let’s not sugarcoat this. “At this stage of the game, you would need to save 40 percent of your income to reach the equivalent of what you would have had, had you started saving just 10 percent of your income in your 20s,” said Liz Weston, a columnist with NerdWallet, a personal finance site.
— Read on blog.massmutual.com/post/retirement-savings-catch-up

3 reasons investors might not be benefiting from rock-bottom fund fees – MarketWatch

Posted on by

There’s more to successful investing than just watching costs

The index fund fee-cutting battle reached its seemingly inevitable conclusion more than a year ago, when Fidelity Investments launched four zero-cost index funds. You can’t get any lower than zero, right? Apparently, you can. One small fund company is now effectively paying investors to own one of its index funds.

Still, the price war among financial companies has clearly moved on, with some firms eliminating brokerage commissions in 2019 or touting the high interest rate paid by their brokerage cash account. Cutting index-fund expenses is, it seems, so last year.
— Read on www.marketwatch.com/story/3-reasons-investors-arent-benefiting-from-rock-bottom-fund-fees-2019-12-18

Paying Yourself First

Posted on by

“Don’t save what is left after spending; spend what is left after saving.”

Warren Buffett

Automated saving and paying yourself first are probably the top two things Americans can do to create wealth and financial security.

Too many people try to save in a way that’s exactly backward. They spend first and then attempt to save up toward the end of the year.

The far more powerful way to save and invest is to set aside a percentage of your income every pay period — recommended 15%, 20% or more — and to save and invest it automatically.

Inevitably rich

Most of the folks who have accumulated wealth got there by systematically socking away a reasonable percentage of their pay into a broad array of stocks and keep doing it for decades.

The key take-aways are to make your savings an automatic deposit so you don’t get a chance to change your mind and spend it. And, spend what’s left and you’re certain to be on the right path to build wealth for tomorrow. Additionally, don’t forget to invest it!

By saving first, you eliminate the problem of not having enough money to save at the end of the month. Setting up automatic deposit into savings or brokerage accounts, you can secure your financial future and build wealth.

Source: https://www.marketwatch.com/story/the-huge-financial-force-even-albert-einstein-missed-2019-12-10

What this man regrets about going from $2.26 to $1 million in five years

Posted on by

BY MARKETWATCH — 12/12/2019 3:37 PM ET

Achieving financial independence took time and sacrifice — and came with some regrets
In five years, Grant Sabatier went from having just a few bucks in his bank account to more than $1 million — and he did it through side hustles, sacrifice and investing. But if he had to do it all over again, he said he probably wouldn’t have done it quite the same way.
He made many trade-offs, and a few mistakes, like “making money my God and chasing the next thing, no matter what,” he admitted.
The young millionaire, who blogs at MillennialMoney.com (https://millennialmoney.com/) and is the author of “Financial Freedom,” accomplished financial independence by making small goals for himself — first, shooting to save $1,000, then $2,000, then $4,000. As he reached his goals, he’d double them. “We usually focus on the million-dollar goal or retiring early, and while it is important to set goals, don’t let those goals distract you from taking the next step,” he said. Starting small and consistently doubling his figures made the goal accessible, mentally and physically. “If you are completely in debt and you don’t have anything saved, just save your first $1,000, and see how it makes you feel,” he said. “You’ll feel better than you thought you would.”
But there needs to be balance, something he did not account for on his path to $1 million. That means enjoying life, and that looks differently for everyone (http://www.marketwatch.com/story/its-time-to-stop-judging-people-for-drinking- lattes-and-getting-regular-haircuts-2019-05-14). Stripping yourself of experiences and items that are meaningful can backfire. Sabatier said he had to detox after five years of working 100-hour weeks and traveling, for example.
Hitting a financial goal should be less about quantitative reasons, like having $1 million in an investment portfolio, and more about qualitative reasons, like leaving a job you hate or paying for an annual family trip. “It’s about looking at your life. Do you feel like you’re growing? Do you feel like you’re in a place you like and you have friends you like? Do you like your life?” Sabatier said. “If the answer to that question is no, then the first place you need to look is your money.”

— Read on www.marketwatch.com/story/what-this-man-regrets-about-going-from-226-to-1-million-in-five-years-2019-12-12

IPO Stocks Luckin Coffee, Dynatrace, Progyny, Datadog, Ping Identity Near Buy Points | Investor’s Business Daily

Posted on by

IPO stocks are hot right now, with several 2019 new issues acting bullishly, trading near buy points. Chinese Starbucks (SBUX) rival Luckin Coffee (LK) is one of five IPO stocks worth adding to your watch list this week. Dynatrace stock, Progyny stock, Datadog stock and Ping Identity stock round out the quintet.

Fertility services specialist Progyny (PGNY), cybersecurity play Ping Identity (PING) and app monitoring software maker Dynatrace (DT) are all profitable, while cloud software name Datadog (DDOG) is barking at the door of profitability. Luckin Coffee stock is a big money loser, but has tremendous sales growth.

— Read on www.investors.com/news/ipo-stocks-luckin-coffee-dynatrace-progyny-datadog-ping-near-buy-points/

Becoming a Better Investor

Posted on by
  1. The secret to great investing is patience. Take the time to study, to learn and to practice. There is no rush. Make a Wish List of liked companies and wait for them to go on sale.
  2. Best investors often do best during market panics, when investors dump shares in fear, or when there’s unusual volatility, such when stocks soar to unrealistic levels.
  3. Take advantage of the greed and fear of other investors. Investors can profit by avoiding panics, picking up stocks for cheap in sudden selloffs and keeping emotions in check, even during volatile markets.
  4. Human emotion inevitably causes the prices of assets — even worthwhile assets — to be transported to levels that are extreme and unsustainable: either vertiginous highs or overly pessimistic lows.
  5. Focus on a company’s actual earnings, revenues and cash flow, and do not succumb to rosy projections and predictions about the distant future. Ignore the sometimes-enticing stories spun by bankers, analysts and others, the kinds that have led to huge losses for even sophisticated investors in recent years on high-profile companies.
  6. Security prices should generally fluctuate not much more than earnings and revenues. The reasons they fluctuate more are largely psychological, emotional and non-fundamental. The truth is that financial facts and figures are only a starting point for market behavior; investor rationality is the exception, not the rule; and the market spends little of its time calmly weighing financial data and setting prices free of emotion.
  7. Pick your spots, and only invest in areas you have a competitive advantage, perhaps due to a unique industry expertise. For all their skill, the firm only profits on barely more than 50% of its trades, a sign of how challenging it is to try to beat the market.
  8. “It’s different this time” are four of the most dangerous words in the business world — especially when applied, as is often the case, to something that has reached what in prior times would have been called an extreme. People’s decisions have great influence on economic, business and market cycles. And people don’t make their decisions based on science, facts or fundamentals.
  9. There are more factors and variables influencing financial markets and individual investments than most realize or can deduce. Investors tend to focus on the most basic forces, such as earnings, interest rates or short-ratios, but there are dozens of factors, perhaps whole dimensions of them, that are missed.
  10. Cycle positioning is the process of deciding on the risk posture of your portfolio in response to your judgments regarding the principal cycles. It primarily consists of choosing between aggressiveness and defensiveness: increasing and decreasing exposure to market movements. The recipe for success consists of (a) thoughtful analysis of where the market stands in its cycle, (b) a resulting increase in aggressiveness or defensiveness, and (c) being proved right. These things can be summed up as “skill” or “alpha” at cycle positioning.
  11. Detecting and exploiting the extremes of market cycles is really the best anyone can hope for. Between the extremes of “rich” and “cheap” — when the cycle is in the middle ground of “fair” — the state of the relationship between price and value is, by definition, nowhere as clear-cut as at the extremes. If you frequently try to discern where we are in the cycle in the sense of “what’s going to happen tomorrow?” or “what’s in store for us next month?” you’re unlikely to find success. I describe such an effort as “trying to be cute.
  12. A backcast is an exercise where you imagine having reached a goal and then you work backward to figure out what happened to get you there. Backcasting is a more instinctive exercise. After all, we generally plan for success. 
  13. A premortem imagines the opposite — failing to reach your goal — and asks “how did that happen?” Imaging failure, on the other hand, doesn’t feel good. But failing to do a premortem can ruin even well-thought-out strategies for long-term success. If we anticipate later actions that can undermine our plans, we can improve the likelihood of staying on course.

Source: https://www.marketwatch.com/story/turn-yourself-into-a-better-investor-by-learning-from-hedge-fund-star-jim-simonss-successes-and-failures-2019-11-07?mod=home-page

Source: https://www.marketwatch.com/story/oaktrees-howard-marks-has-5-tips-to-make-you-a-superior-investor-2018-10-02

Source: https://www.marketwatch.com/story/this-champion-poker-player-says-a-premortem-can-make-you-a-better-investor-2018-03-07