Because of the Efficient Market Hypothesis, nobody knows what stocks are going to go up or down. Not your cousin, not your broker, not your advisor. Over time, the performance of 99.9% of stock pickers is indistinguishable from luck. That’s why I advise investors not to try to time the market. A stock’s price is …
Investing Blog
Reexamining the 1st Key Rule of Successful Investing: Don’t Try to Time the Market
Diversification and Portfolio Overlap
Diversifying is easier said than done. It’s easy to own stocks across different market sectors, such as a tech company and an oil company and a clothing company plus a food company. But there are more layers to diversification. You should diversify in terms of size and geography, in addition to market sector. If you …
Total Fees and Turnover
We’ve reviewed how mutual fund expenses can eat away at your portfolio. In fact, total fund expense is the most important variable to consider when comparing funds because it’s the one that actually makes a difference. The Portfolio MRI will uncover what you are paying in “total fees” – not just the fees you know …
Putting the Portfolio MRI in Context
The Portfolio MRI is part report card and part recipe book. It breaks down information about your investments and stacks them up against inflation-adjusted historical data reflecting different asset mixes, funds, indices, etc. I like to walk through the Portfolio MRI with my clients step-by-step. I want everyone to understand the logic behind the investment …
How We Evaluate Your Portfolio
We believe that an investment portfolio should be built on a sound foundation of research, a strategic and closely adhered to financial plan, and rational expectations. Speculation or hunches, and the perpetual buying and selling of stocks, are costly and inefficient. There is no single “right” answer for how much risk is appropriate for a …
When to Rebalance
When and how often should you rebalance your portfolio? You can do it based either on the calendar or on your investment ratios. Many financial experts recommend that investors rebalance their portfolios on a regular basis: every six or twelve months. The advantage of this method is that the calendar reminds you when to rebalance. …
Making Asset Allocation Work for You
Once you decide on your asset mix, one thing you must do to keep your portfolio working for you is rebalance it periodically. Rebalancing means bringing your portfolio back to your desired Asset Allocation mix. It is important to rebalance because some investments will grow faster than others, which will cause the ratios of different …
Asset Allocation
A well-diversified portfolio spreads your investment among different types of investments, and within different asset classes. Asset Allocation is how you accomplish this. Asset Allocation refers to the composition of your investment portfolio . You can divide your investment in many ways, including stocks, bonds, cash, and cash equivalents. An Asset Allocation-based strategy aims to balance …
Asset Allocation and Diversification
It’s virtually impossible to predict which asset class will do well over a specific period of time. Sometimes different asset classes move together; sometimes they don’t. Some tend to move in the opposite direction from others. For instance, when the dollar weakens, international stocks tend to do better. There have been long periods where certain …
The Three-Factor Model for Diversification
Eugene Fama and Kenneth French, professors at the University of Chicago Booth School of Business, expanded on the research into diversification, identifying three key factors that affect a portfolio’s returns. You can think of each of these factors as a type of investment risk: Market Factor, Size Factor, and Value Factor. Market Factor: The Market Factor …