Around four years ago I was practicing French with Debbie before a trip to Paris. I wrote then: Je Me Sens Bien As you read this month’s strategy report, Debbie and I will be in Paris. Practicing her French yesterday, Debbie asked me if I knew the meaning of je me sens bien, with James Brown as a clue. Well, not knowing for certain, I guessed, “I feel good,” a great James Brown lyric. Debbie was astounded that I got the quiz, as was I, because I really had no idea. So what gives? The answer lies in association. The rhythm of the four words simply brought the James Brown lyric to mind, … [Read more...]
In Wine and Investing, One Must Get the Big Picture Right
There are few subjects studied by so many, but still so little understood as investing and wine. Nearly everyone you meet has an opinion on both, but start getting specific and you realize the pool of knowledge isn’t deep. You don’t need to be an expert in either, but it helps to get the big picture right. In February of 2011 I wrote: Medieval Monks Terroir (teh-RWAHR). Literally “terrain” in French. David Downie in Food Wine Burgundy explains that originally terroir was used to refer to the particular qualities that soil and climate bestow on wine. The French word climat designates a … [Read more...]
The Dividend Plan
Panic selling during periods of market decline can be devastating to your long-term investment success. In 1987 many investors were frightened out of the market and missed out, not only on the rebound in shares in the following years, but on all the dividends they could have used to buy more shares at depressed prices. I reminded readers of that in February of 2009 when the Great Recession was at its bleakest. Here’s what I wrote: The 1987 Debacle I remember the crash of September/October 1987 like it was yesterday. Virtually overnight, the Dow collapsed to about 1700 from 2700. Terrified … [Read more...]
Two Strategies to Avoid Outliving Your Money
In July 2007 there was a sense of unease in the markets and I was warning investors to prepare themselves with a low draw on their portfolios. I also gave investors two ways to help prevent outliving their money. Read here: At the start, retired investors and investors saving seriously for retirement (76 million boomers will begin retiring next summer) must answer two basic questions: (1) What is the proper mix of stocks and bonds? (2) How much money can be drawn annually from an investment portfolio? I have used Ibbotson data and examined 20-year rolling time periods from 1926 on. I have … [Read more...]
The Yield Curve Inverted: Time to Panic?
If you have been reading the financial papers or watching CNBC, you have seen the news that the U.S. yield curve has inverted. Typically, this is a sign of a coming recession, and that could be the case today. If, though, you have been following my advice, there is no reason to panic. Have patience and rely on the diversified, counterbalanced portfolio you have built for generating dividends and compound interest. In August of 2013 I explained the power of counterbalancing in your portfolio: Managing a common stock portfolio takes— above all else—patience. Your goal should never be what to … [Read more...]
Don’t Get Kicked Out of the Game
One of the biggest mistakes an investor can make is to imagine that the market will perform the same way year after year. Last year’s winners are often this year’s losers. I warned investors against this mistake in July 1992, writing: How many investors—not you I hope—buy mutual funds keyed to recent performance ratings? These are usually the funds not to buy. Have you ever heard of Frank Russell Co.? These folk do a really good job of researching vital investment info. In a recent Pension & Investments article, the following item was of vital importance to you. A new study by the Frank … [Read more...]
Here’s What You Need to Know about Dividends
In November 1999 tech stocks with no dividends seemed like a sure bet. Despite the hype, I was still doing my best to encourage my readers to stick the principles of dividends and compounding. Here’s what I wrote then: Historically, Dividends Provide Much of Total Return What about the base for the economy and the stock market in general? As I’ve written often, the two are inexorably linked. After all, could stocks on average outrun the performance of all the companies that jointly contribute to our country’s gross domestic product? No. and, here’s why. Over seven decades, from 1926 to … [Read more...]
The 5 Rules of the Financial Armadillo
In the heart of a bull market in March 1997, I was urging investors to ignore the “TV media financial gibberish, most of which is sensationalized to keep you twitching to the max.” I wanted to show readers how to insulate themselves from a bear market. To do so, I gave them my Financial Armadillo Strategy, an armor-plated long-term plan I use myself to this day. I wrote: Take a pledge of allegiance each day to your most trusted investor ally, compound interest. Learning how to better harness the awesome power of compound interest assures you of long-term success. It is interest on … [Read more...]
You’re in Charge: Act—Don’t React
Thirty years ago this month, I was working hard to explain to investors like you the simple power of having a plan. An investment plan is the reliable engine that keeps your investment train on its track. I told readers they shouldn’t make investments without consulting their plan, writing: Am I clear on this? Sit back, take a deep breath and repeat after me, “I will have a plan; I will not be a reactionary investor; I will practice diversification.” Still with me? You see, I want you to lower your financial blood pressure. If an idea is sound today, it must be sound tomorrow. I learned … [Read more...]
Here’s How to Build Yourself a Barricade Against Volatility
Back in October of 2006, as the crest of the Housing Bubble was forming, I remained doggedly attached to my principled investment strategy of diversification and compound interest. That month I encouraged readers to build a “volatility barricade.” Here’s what I wrote (with updated numbers to reflect the intervening years): Your Volatility Barricade Your portfolio’s fixed-income position does two things for you. (1) It either throws off cash for you to spend at Ace or True Value (not Wal-Mart or Home Depot) in retirement or, instead, allows your interest to compound in an IRA. (2) Your … [Read more...]
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