|Archived Articles • 2009|
December 2009Reach for Stock Yield, and You Might Get Bit [WSJ, 12Dec09] "With the income from bonds withering away, investors are piling into dividend-paying stocks... Think twice before you join the stampede... don't kid yourself into thinking stock dividends and bond interest are interchangeable. They aren't."
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Warren Buffett sings a different tune in his advice to investors [Globe&Mail, 07Dec09] "In short, Mr. Buffett's one best idea for most investors is to invest in index funds via dollar-cost averaging – this is the best way to tap into the dynamism and growth potential of free-market economies. Then focus on your career, your family, and enjoying life: that is where your time is best allocated. Some good advice from the Oracle of Omaha."
The Dark Side Of TIPS [Forbes, 04Dec09] "Inflation-indexed bonds are often described as the ultimate risk-free investment... However, there is another side to this story that is rarely discussed... Real interest rate increases are not the same as inflation-based interest rate increases."
New to investing? Take a close look at e-funds [Globe&Mail, 07Aug09] "One of the all-around best products offered by the Canadian mutual fund industry is also one of its most invisible. The e-series of index funds offered by Toronto-Dominion Bank's fund arm are exceptionally cheap to own and usually among the better performers in their category. You pay nothing to buy or sell them, and they're widely accessible because they're sold online and available in amounts as little as $100."
Does Stock-Market Data Really Go Back 200 Years? [WSJ, 11Jul09] "As of June 30, U.S. stocks have underperformed long-term Treasury bonds for the past five, 10, 15, 20 and 25 years. Still, brokers and financial planners keep reminding us, there's almost never been a 30-year period since 1802 when stocks have underperformed bonds. These true believers rely on the gospel of "Stocks for the Long Run," the book by finance professor Jeremy Siegel of the Wharton School at the University of Pennsylvania that was first published in 1994... There is just one problem with tracing stock performance all the way back to 1802: It isn't really valid."
Is Vanguard Sailing in Uncharted Seas? [WSJ, 13Jun09] "What on earth was Vanguard thinking? That is what investors in Vanguard Group, the nation's largest mutual-fund company by assets under management, have been asking ever since Vanguard emerged as one of the bidders for the iShares family of exchange-traded funds last month... Is Vanguard's management recklessly pursuing market share? I don't think so."
The danger of leveraged ETFs [Ellen Roseman, 12Jun09] "FAIR Canada, a new group that speaks for investors, doesn’t want to see leveraged ETFs sold to the buy and hold crowd. Check out its its investor alert, which is very readable. The advocacy group is asking securities regulators to beef up prospectus disclosure... Now the Investment Industry Regulatory Organization of Canada has put out its own warning to investment dealers, as has a U.S. financial regulator."
Capitalism Evolving: Be a Cockroach, Not a Dinosaur [Psi-Fi Blog, 02Jun09] "In the end to avoid being out-evolved you either need to be lucky enough to be a dinosaur during one of the long periods of unchanging market conditions – 1949 to 1969, for instance – or you need to be a cockroach, well adapted to surviving under any circumstances. Just don’t think you’re an indestructible insect when you’re actually a lumbering giant lizard with a brain in your bottom."
If you can't beat 'em, why not try the passive approach? [Scotsman, 01Jun09] "Miller was paid £3.3 million in 2003 as chief investment officer and manager of New Star's Hedge Fund. Thus for New Star's investment clients it was quite an eye-opening declaration when he let it be known that he has been investing his money in Exchange Traded Funds and index trackers for years while – as Alan Dick, head of Glasgow-based independent financial adviser FortyTwo Financial Planning, bluntly put it to me last week – 'earning massive fees and bonuses for under-performing the market with other people's money'."
Can You Trust Your Financial Advisor? [CBC, 10May09] "Have your investments lost money recently? Many Canadians facing serious financial hits on their life savings are starting to wonder how much they can really trust their financial adviser or broker. We bring you first-hand accounts of how big companies may be taking advantage of investors in small ways - and big ones too. And we debunk some of the myths surrounding those 'trusted people' who are investing your money."
Unintended Consequences of Public Policy [EdgePoint, 03Apr09] "The McGuinty government is proposing the harmonization of Ontario’s provincial sales tax with the federal GST. The decision to jam an additional 8% tax on the management expense ratios (MER) of your investment products is shockingly unwise and dangerous." But that's almost nothing compared to the even more shockingly unwise and dangerous effect that high MERs have on your portfolio as explained on FWF
'It will sell': A tipoff for bad investment products [Globe & Mail, 04Apr09] "My purpose here is to illuminate some of the tradeoffs investors make when they go beyond plain vanilla... I liken structured products to Viagra. The industry is hooked on them because they stimulate sales. They're a specialty product that should be used by few, but are sold to many. And the buyers get instant gratification, but pay for it in the long run."
Greed and Stupidity [NY Times, 02Apr09] "What happened to the global economy? We seemed to be chugging along, enjoying moderate business cycles and unprecedented global growth. All of a sudden, all hell broke loose. There are many theories about what happened, but two general narratives seem to be gaining prominence, which we will call the greed narrative and the stupidity narrative."
ETF rule: Keep it simple [GlobeAdvisor, 23Mar09] "Don't fall for complex, expensive exchange-traded funds; search for a broad index and low, low fees... These rules should serve index investors well over time."
Primer on ETFs: Some help amid the bear market [Globe & Mail, 21Mar09] "bylo.org: A do-it-yourself investing advocate known as Bylo Selhi maintains this site, and the emphasis is on index funds and ETFs. You'll find a helpful list of links to the websites of the Canadian and U.S. companies offering ETFs, as well as to a web page with a complete inventory of ETFs listed on the Toronto Stock Exchange. If you want to better understand the indexes that ETFs track, this site has links for them as well."
Personal Finance with Zvi Bodie: The Conventional Wisdom is Wrong [Boston University, 05Mar09] "This series of ten videos features School of Management Professor Zvi Bodie discussing crucial topics in personal finance. From the hidden risks in your 401k to the age you should retire, Professor Bodie covers much of the ground in his book Worry Free Investing."
Breaking your bad habits before they break your bank [Globe&Mail, 16Mar09] "When it comes to money and investing, our bad habits can mean the difference between achieving financial security and living on the edge of bankruptcy. That's especially true during recessions, when folks who stretched their finances during the good times, or made impulsive investing decisions, can be pushed over the edge by a sudden job loss or market meltdown. Here are some of the most common bad habits with respect to money, and tips on how to break them."
Bogle calls for fiduciary standards [Investment News, 13Mar09] "Congress should enact legislation mandating that all investment advisers and money managers come under fiduciary standards, John Bogle, founder and former chief executive of The Vanguard Group Inc. of Malvern, Pa., said today... “Surely it should be clear to clients whether they are relying on a trained investment professional, paid solely through fully disclosed fees, or a sales rep who sells the products and services of the company he represents, whether life insurance, annuities, mutual funds or anything else,” said Mr. Bogle." Full speech here
This is your brain. This is your brain on money [Globe&Mail, 11Mar09] "From his perch as director of the Massachusetts Institute of Technology's Laboratory for Financial Engineering, Andrew Lo has closely observed investor behaviour during the current crisis. So far, what he has seen confirms his view of how markets work. His Adaptive Markets Hypothesis seeks to bridge the divide between academics who believe in the rationality and efficiency of markets and the behaviourists who argue that psychology always prevails."
'Rebalancing' Your Portfolio Can Be a Tough Ride [WSJ, 07Mar09] "Another market truism -- regular rebalancing of your portfolio guarantees higher return and lower risk -- has bit the dust. Rebalancing ensures that you buy low and sell high. It can work. But that doesn't mean it always works... Whether rebalancing will heal or hurt your portfolio depends not only on what the markets do but also how they do it. Even techniques that are supposed to reduce risk carry risks of their own."
Dispelling Myths About Stocks in the 1930s [Barron's, 06Mar09] "After examining several aspects of the stock market's behavior during the 1930s, it would appear as though a replay of that decade might very well be less scary than assumed by many of those who superficially draw the analogy... If we are indeed playing out a 1930s-like script, we have an incredibly wild ride ahead of us. But for those who have the intestinal fortitude to hang on, such a story would have a surprisingly happy ending."
Do it yourself - or not? [Globe & Mail, 18Feb09] "Whether to use a financial adviser or go it alone is made all the more important as markets take a tumble... By looking after your own portfolio you'll save on commissions and develop a better understanding of the world of finance as you invest for your future. But do you have what it takes to be a self-directed investor? Or are you the type who would be better off turning over your finances to a professional?"
Fact or Fiction? 4 ETF Myths [ETFGuide, 10Feb09] "#1 - ETFs encourage investors to become hyperactive traders... #2 – Bid/ask spreads destroy the low cost nature of ETFs... #3 – Short ETFs replicate the inverse long-term performance of their benchmarks... #4 – The best ETFs to own are the popular ones with significant trading volume."
Train to get in financial shape [CNN Money, 09Feb09] "If history teaches us anything, it's that the sweetest victories are won in markets just like this one, even if it doesn't seem that way at the time."
Periodic Table of Annual Returns for Canadians [Stingy Investor, 25Jan09] Shows relative returns of common asset classes, includind Real Return Bonds, in either nominal or real terms in Canadian dollars.
Periodic Table of Investment Returns [Callan, Jan09] "representation of relative asset class performance over the last 20 years... ranked from best to worst. Each asset class is color-coded for easy tracking. Well-known, industry-standard market indexes are used as proxies for each asset class."
When enough is enough [MPR, 14Jan09] "The founder and former CEO of mutual fund giant Vanguard shares his philosophy on investing. He says decisions based on greed and speculation can wreak havoc on a typical investor's portfolio."
Six Lessons for Investors [WSJ, 08Jan09] "There is almost no limit to the ability of investors to ignore the lessons of the past. This cost them dearly last year. Here are six of the most important of these lessons."
Investing Experts Urge 'Do as I Say, Not as I Do' [WSJ, 03Jan09] "If you think it is hard to stick to your New Year's resolutions, consider how some of the investing world's leading experts don't always take their own advice. Often, they diversify by the seat of their pants, fail to adjust their portfolios to changing values, ignore tax issues and take a flier on individual securities even when they know better. Nobody -- and I mean nobody -- is perfect."
Lessons the Market Taught Us in 2008 [Seeking Alpha, 01Jan09] "Every year, the markets provide investors with lessons on the prudent investment strategy. This year’s bear market provided a sufficient number of lessons that it should be considered a 'doctoral seminar.'"