Stay Diversified Through Lows

Stay Diversified Through Lows

By: Larry Swedroe There are several keys to having a successful investment experience. The first is to create a well-thought-out financial plan. This plan should begin with identifying your ability, willingness and need to take risk, as well as what it is you want your money to do for you. Having identified all the appropriate risks and objectives, an overall financial plan can then be developed (one that integrates the investment plan into an estate, tax and risk management plan). The next step is to decide on the investment strategy most likely to allow you to achieve your goals within the risk parameters acceptable to you. Tools For Investors Two tools that advisors, trustees and investors can use to help identify the prudent investment strategy are the 1992 Restatement of Trust (Third), also referred to as the Prudent Investor Rule; and the 1994 Uniform Prudent Investor Act. Both of these incorporated modern portfolio theory (MPT) into their writing. Among the fundamental tenets of MPT is that, done properly, diversification reduces the risk of underperformance, as well as the volatility and dispersion of returns, without reducing expected returns. Thus, a diversified portfolio is considered more efficient (and thus more prudent). The Uniform Prudent Investor Act states that “because broad diversification is fundamental to the concept of risk management, it is incorporated into the definition of prudent investing.” Clearly, the benefits of diversification are well known. In fact, it’s been called the only free lunch in investing. It’s why I recommend that investors diversify not only across domestic equity asset classes (small- and large-cap stocks, value and growth stocks, and real...
How to Build Your Investment Portfolio

How to Build Your Investment Portfolio

By: Stuart Vick Smith How you invest your money can shape how you build your future. This is true whether you are in your 20s and just starting to save up for a new home or you are in retirement and managing your money through your golden years. Creating a solid investment portfolio may be one of the most important determinants of your financial success. With tens of thousands of stocks, bonds, mutual funds, ETFs and other investment options to choose from, where should you start? Constructing the right portfolio to meet your goals can be daunting. For many, it’s similar to renovating a house and not knowing where to begin. Do you meet first with the contractor or the architect? Do you include a decorator now or later? Do you move out while the work is underway or do you stay put? How do you orchestrate all the pieces necessary to make it run smoothly and efficiently? As with any formidable project, the best thing to do is to break it down into smaller, more manageable tasks. Here are some fundamental and easy-to-implement steps to follow when building your investment portfolio. Hopefully, they will help you simplify what can often feel like an overwhelming job. Separate saving and investing. Think about your big-picture financial goals. For example, saving to purchase a new house is very different than putting money aside for retirement. So, separate your goals into short-term and long-term objectives. Any money you’ll need in the next five years should go into savings, not the stock market. Stocks are too risky and volatile in the short term....
Learning How to Deal With the Haters

Learning How to Deal With the Haters

By: Carl Richards We all like to act as if we’re immune to the vitriol of haters. It’s almost cool to pretend that it doesn’t affect us, like we’re all bulletproof and have some kind of armor against it. And while that might be a helpful coping mechanism, it’s not really true for most of us. The truth is that this stuff really hurts. What’s more, if you don’t deal with it in the proper way, it can have a major impact on your ability to do work that matters in the world. I was displaying some of my sketches recently at a fantastic community art center, the Center of Creative Arts in St. Louis. There were a couple of events, and Once Films was there to help capture the show. While the film crew set up, I wandered over to a table near the gallery entrance and noticed a guest book. It was set up so people could comment on the work. I remember thinking, “Oh, this will be great. I can’t wait to see what people think of my work,” and I opened the book. Most people would just write their names, where they were from and a friendly or positive comment. But what stuck out most were three not-so-nice reviews. Chris Ryan, a principal and producer/director at Once Films, came over to me as I sat there reading and rereading these three comments. I said, “Can you believe this?” and started reading them out loud. I expected him to say something supportive, or to tell me not to worry about it. But instead he said, “Oh...
Are You Living The Life You Chose?

Are You Living The Life You Chose?

By: Tim Maurer I love finding financial wisdom in unlikely places, like in art and music. These opportunities are more abundant than you might expect. For instance, the punk-Americana outfit, The Avett Brothers, dedicated an entire tune, aptly titled “Ill With Want,” to the scourge of greed and Mumford & Sons taught us that “where you invest your love, you invest your life.” The newest melodic metaphor to catch my ear comes from singer-songwriter Jason Isbell. He expresses his appreciation for having work in the title track of his newest album, “Something More Than Free,” but it’s the pair of questions he poses in another song, “The Life You Chose,” that really got me thinking. “Are you living the life you chose? Are you living the life that chose you?” asks Isbell. I fear it is the latter for many, if not most, of us. Perhaps we are stuck living a life that has grown into a web of circumstances driven more by external compulsions than autonomous impulsions. For too many, life is lived at the behest of someone else’s priorities and goals, in pursuit of someone else’s calling. No, I’m not a Big Brother conspiracy theorist. It just seems to be the natural way of things. After all, it can be more expedient to perform the task that someone else has delegated, to attend the meeting that someone else has set, to pick up the ringing phone or to respond to that incoming email than it is to initiatein life and work. It’s easier to consume than it is to create. But you don’t have to be a...

What You Need to Know About the Department of Labor Fiduciary Rule

By: The BAM Alliance On April 6, the Department of Labor (DOL) published the final version of the conflict of interest rule it proposed in April 2015. The new regulations require those who advise on retirement savings plans to adhere to the “fiduciary standard” that BAM ALLIANCE firms have long held dear. Because we’ve always been fiduciaries, these regulations won’t affect our relationship with our clients, but it’s a big win for individuals saving for retirement through their employer-sponsored retirement plans or through Individual Retirement Accounts (IRAs). The new regulation should provide extra transparency and peace of mind in a relationship retirement savers usually don’t have control over (who their employer chooses to manage their retirement plan). We hope to see the rule result in better investments offered (and better advice given) to retirement plan participants across the country. We anticipate investors will be curious about what the ruling means to them, so we have answered a few big questions below: Why was this regulation proposed? The DOL fiduciary rule was proposed to better protect people who are saving for retirement as a result of changes in the investment environment. Over the last 40 years, the availability and importance of self-managed investments, such as IRAs and participant-directed retirement plans, has increased. At the same time, the number and complexity of investment products in the marketplace has grown, as well as the creative and sometimes questionable way they are packaged and sold. Due to this changing landscape, the DOL has issued new conflict of interest rules that apply to retirement plan advisors and IRAs. The DOL believes that requiring all advisors...
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