Originally posted August 1, 2016. Vanguard Dividend Growth Closes to New Investors No, it is not the end of the world, but if you are a loyal Vanguard investor, as am I, having one of the few dividend-based funds in the world I advise for purchase close is a “Vanguard Crisis” for me as well as for many individual investors. How is this “Crisis at Vanguard” going to play out for the individual investor? I have been anticipating this “Crisis at Vanguard” for a long time. And it is going to become a broadening industry crisis, not just a “Crisis at Vanguard.” The handful of big mutual … [Read more...]
Put the Odds on Your Side
Near the end of 1993, Debbie and I were hunkered down at The Dorset Inn in Vermont. Its wide pine board floors, restored tap room, gourmet dining room and antique-outfitted guest rooms make the small inn a special place to get away from the constant din of markets and politics. Events that fall were oddly connected to this very moment in American history. In November of that year President Bill Clinton told the world that North Korea must never be allowed to develop a nuclear weapon. And in December, Clinton signed NAFTA into law. Projections made in 1993 on how the Korean situation and … [Read more...]
When Investing, It’s Better to be a Leper than a Lemming
During my five decades of investing, I have more often than not been arguing against the going wisdom of the markets. To call me a contrarian would be accurate. Leper investor also fits. In December of 2001, I explained what I called “Leper Investing,” to my readers. Leper Investing In order to invest successfully over your lifetime, you need to act counterintuitively; that is, against the prevailing Wall Street wisdom. You want to buy contrary-opinion names—those stocks loathed, despised, and shunned by the institutional magnets. Your caches of lepers will generate above-average … [Read more...]
Does Your Portfolio Pass My Three Step Test for Balance?
Back in 1993 I explained my three-step test for balancing your investment portfolio between bonds and stocks. At the time I was recommending Treasuries, but you can use this advice no matter what kind of bonds you’re buying. Use your age and my three-step test as a starting point for how you plan to allocate your portfolio. I wrote: I want you to keep your investment portfolio well balanced. But just how much of your portfolio should be invested in equities and how much should be in Treasuries? Here’s a basic strategy that is based on your age. The percentage of your portfolio that is in … [Read more...]
Breaking News: BP’s Explosion in Battery Technology
There aren't many events that could change both the dynamics of international affairs and the discussion surrounding the environment faster than a major innovation in battery technology putting electric automobile performance on par with internal combustion engine powered machines. Not to mention that entire sectors of business would be created and possibly destroyed by such an innovation. BP is focused on the idea of battery innovation, and writes about the explosion in such technology in its corporate magazine here (abridged): As BP announces its investment in a developer of electric … [Read more...]
Wellington Management Company
My history with Wellington Management and the Vanguard group goes back decades. I started with Wellington over 40 years ago. The Wellington Fund was founded in 1929 by CPA Walter Morgan to provide investment counsel to his clients. Morgan had the foresight to load the Wellington Fund with fixed-income securities months before the 1929 stock market crash. That decision helped Wellington become the tenth largest in the industry by 1944. In 1951, Morgan hired John Bogle, who would eventually become the firm’s CEO. In 1974, Bogle left Wellington Management and founded the Vanguard Group, … [Read more...]
Do Old Investing Rules No Longer Apply?
Do the old rules no longer apply? Can you live on corporate earnings alone? Is ignoring your margin of safety advisable? It turns out, unsurprisingly that the answer to all these questions is no. Back in November of 1997 I wrote the following (my emphasis added in bold): Ben Graham’s Margin of Safety Graham died in 1976, yet his wisdom is as fresh as if he were standing before us today. Ben Graham & Co.’s advice to investors is to evaluate a stock as if you were considering buying the entire company. Graham’s secret of sound investing can be distilled into three words—margin of … [Read more...]
Where do you Begin Investing?
To the uninitiated, investing can seem daunting. There are thousands of stocks, bonds, and mutual funds to choose from, and probably just as many opinions on which you should buy and which you should avoid. Even the most diligent novice can become overwhelmed by the number of decisions that must be made. To get started, I have long advised a risk-first approach. That means a focus on fixed income. For most investors, it’s a little hard to know where to even begin. So where do you begin? Tops on my list is your fixed income component. Most investors fail to maintain an adequate mix of fixed … [Read more...]
The Ten Worst Bets
Almost thirty years ago in 1989, I advised my readers on the ten worst bets for the year. Topping the list was overpriced real estate in New England, New York, and California followed by Japanese stocks and real estate. My long-time followers may recall how real estate prices fared after that projection. Housing prices cracked in all three regions and entered a severe downturn. Anybody levered and long in residential real estate took it in the neck. According to the Case-Shiller real estate indices for Boston, New York, and L.A., the peak to trough decline in prices ranged from 15% to … [Read more...]
You Must Address the Issue of Risk
What risks are lurking in your portfolio? Calm markets have made many investors complacent. Are you one of them? Far too many portfolios that come across my desk are heavily invested in risky assets (yes, the S&P 500 counts) with no counterbalancing assets to tame volatility. Look at my chart below to gain an appreciation of just how helpful counterbalancing assets can be in your portfolio. Here you are looking at the performance of intermediate-term government bonds (dark blue) in years when the S&P 500 (bright blue) lost value. Since 1950, government bonds have been up in 13 of … [Read more...]
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