How you invest in stocks and bonds, in other words, your asset allocation can mean more to your investment success than what you invest in. Let me explain. When you look at risk/reward as measured by my efficient frontier, you can see by the fish hook how having your eggs in one basket can mean more risk. Obviously, 100% in stocks will be riskier as measured by a portfolio’s ups and downs or standard deviation. But what’s not always clear is that having 100% in bonds can be riskier than a mix of, say, 20% stocks/80% bonds. As you see above, this efficient frontier is a combination of … [Read more...]
Your Retirement Life: Traveling the Efficient Frontier
Are you familiar with the efficient frontier? More on this in a minute. First, let’s talk about risk. One of the more helpful exercises in understanding your own risk tolerance is imagining how you will react if your stock portfolio declines by 30% or so. You can do a historical review of how you reacted in times when markets took a beating. How did you feel? And how did you react? Where you are in your stage of life is crucial, too. If you’re soon to be retired or newly retired, this is most likely uncharted water for you in terms of stock investing and your emotions. When you no longer … [Read more...]
What’s the Right Amount to Invest in Stocks?
Your Survival Guy has witnessed it all when it comes to investing. I’ve written to you about the top 10 investing mistakes to avoid and the top 10 investing habits of the fairly wealthy (see below). I’ve told you how I see investors get overweight in stocks like it’s an all-you-can-eat buffet. Then they switch to a strict diet of cash, selling out at the bottom of a bear market, never to get back in. It’s why I don’t try to time the market, nor do I advise it for you because you need to be right twice: when to sell and when to rebuy. Avoid the problem altogether. Don’t get greedy. … [Read more...]
“Survival Guy, How Much Should I Invest in Stocks?”
“How much should I invest in stocks?” It’s a good question. One you might be thinking about. Sure, when you’re working, it’s easy to invest in stocks because you have a paycheck to lean on like a crutch. But what if you’re retired with no paycheck, living on a fixed income? Investing in stocks can be downright scary. The good news is stocks have historically been good inflation fighters. But how much to invest? You’ve seen the brutal corrections so far this century. And chances are there will be more. “So, Survival Guy, how much do we invest in stocks?” When speaking with … [Read more...]
“Survival Guy, What Have You Done for Me Lately?”
“Hey, Survival Guy, what have you done for me lately?” you ask. “Good question.” Let’s refresh our memories. One of the more important tasks of an investor is to protect what one makes. You know how it goes. Rule #1: don’t lose money. Rule #2: don’t forget rule #1. As another wise man said, then there’s rule #6: “Don’t lose money.” When asked about rules one through five said, “There are no other rules.” See how fun this can be? As we get older, we learn the rules. One way or another, we learn the rules. I’d put the school of hard knocks up against Harvard any day of the week. … [Read more...]
“We Want Preservation…” No Soup for You!
When prospective clients tell me, “We want preservation of principal and growth,” I think of the Soup Nazi from Seinfeld and feel like responding, “No soup for you!” Because this happens all the time. And I get it. Part of our precious time together at www.yoursurvivalguy.com, dear reader, is to learn about each other and to learn the rules of the road. And our road isn’t for everyone. And clearly what we learned in kindergarten still applies, yet is often forgotten: Wait your turn and be nice. Now, this couple in their early 80s were nice. But they are needy: wanting preservation and … [Read more...]
Don’t Get Capsized by Unbalanced Investments
Your Survival Guy’s been telling you for a while now how much overlap I’m seeing in mutual funds and ETF holdings. This has been good for performance, with the S&P 500 tech companies rowing the boat. But how long can that last? My concern is the overall investor exposure to just one sector without them even knowing it. Instead of being crowded to one side and risking capsizing, why not build a portfolio that’s not so overweighted in one sector? Balanced funds are good, but even they are forced to buy the big tech companies because of the size of their assets under management. They … [Read more...]
America’s Pastime Isn’t Baseball, It’s This
You know America’s pastime isn’t baseball. It’s real estate and stocks. You probably have a good idea about house prices in your neck of the woods, and anywhere else you’re interested in. But when it comes to your home, most of the time, you’re not hanging on to its Zillow price, for example, quarter to quarter. That is unless you’re trying to sell your home and even more so if you’ve got a down payment to buy another contingent on it being sold. That puts a bit more pressure on you. You’re relying on the market to do something for you. And it doesn’t always work out. The same goes for … [Read more...]
Your Survival Guy: Wine, Guns, Chicken, and Stocks
Your Survival Guy just finished reading Climbing the Vines in Burgundy: How an American Came to Own a Legendary Vineyard in France about Alex Gambal’s journey in the wine business. Not that he needed to do it. He wanted to. He left the family commercial real estate business and with his young family became entrenched in all things Burgundy. It’s a detailed account but not necessarily a happy one. As with nearly all entrepreneurs, it involves sacrifice. One small comment that stood out to me was how the locals like the store-bought chicken not the much sought-after poulet de Bresse. You can … [Read more...]
CAUTION: Investment Extremists Can Get Wiped Out
In 1985, America was just coming off one of the worst bouts of inflation in its history. Much as today, with inflation trailing off but still a worry in everyone’s mind, an argument naturally broke out between extremists in the financial media over whether America was poised for reignited hyperinflation or a deflationary death spiral. I had recently pioneered the Financial Armadillo Strategy and was asked to add my voice to the discussion with an op-ed in the June/July 1985 issue of Reason magazine. Instead of piling on with more extremism, I wrote: In the last decade, the world economy has … [Read more...]
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