Market Gurus Mostly Strike Out….Again

Larry Swedroe At the start of each year, I compile a list of predictions that gurus have made for the upcoming year, along with some items I frequently hear from investors—sort of a consensus of “sure things.” I keep track of these sure things with a review at the end of each quarter. With the turn of the calendar, it’s time for our midyear review of 2017’s list. As is our practice, I’ll give a score of +1 for a forecast that came true, a score of -1 for one that was wrong and a 0 for one that was…

Social Security & Medicare Challenges Continue

Every year, the Trustees of the Social Security and Medicare Trust Funds release reports to Congress on the current financial condition and projected financial outlook of these programs. The newest reports, released on July 13, 2017, discuss the ongoing financial challenges that both programs face, and project a Social Security cost-of-living adjustment (COLA)  for 2018. What are the Social Security and Medicare Trust Funds? Social Security: The Social Security program consists of two parts. Retired workers, their families, and survivors of workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program; disabled workers and their families receive monthly…

Changing Jobs? Know Your 401(k) Options

If you’ve lost your job, or are changing jobs, you may be wondering what to do with your 401(k) plan account. It’s important to understand your options. What will I be entitled to? If you leave your job (voluntarily or involuntarily), you’ll be entitled to a distribution of your vested balance. Your vested balance always includes your own contributions (pretax, after-tax, and Roth) and typically any investment earnings on those amounts. It also includes employer contributions (and earnings) that have satisfied your plan’s vesting schedule. In general, you must be 100% vested in your employer’s contributions after 3 years of…

The Three-Step Investor’s Guide to Navigating the Financial Advisory Fiduciary Ruling

by Tim Maurer, Director of Personal Finance, 3/7/2017 As an educator in the arena of personal finance, I generally avoid matters of public policy or politics because they tend to devolve into dogma and division, all too often leaving wisdom and understanding behind. But occasionally, an issue arises of such importance that I feel an obligation to advocate on behalf of those who don’t have a voice. The issue of the day revolves around a single word: “fiduciary.” The Department of Labor ruling effective June 9th, requires any financial advisor, stock broker or insurance agent directing a client’s retirement account to act…

The Broccoli and Pizza Portfolio

For some of us, it’s hard to give up on the idea that investing should be exciting. Picking stocks can be fun, after all, and there’s nothing like getting your timing right and bragging about it later with friends. For all the accumulated wisdom about asset allocation, risk, diversification, and discipline, some people seem bound to see investing as an end in itself rather than a means to an end. For these folks, picking stocks is a hobby. They follow the gurus and soak up the financial media. Despite evidence to the contrary, they’re convinced they can build a consistently…

Building an Evidence-Based Investment Plan

“Control what you can control.” —David Butler, co-CEO, Dimensional Fund Advisors By following the above five words from Butler, investors can help simplify their complex financial lives. Out of thousands of pages of scientific research, a cornerstone of evidence-based investing emerges: Control what you can control. Control the fees you pay and your trading costs. Control your tax efficiency and your asset allocation. Control how closely your emotions are tied to an up-and-down market. Bigger picture, you can take better control of your entire financial experience. This article looks at foundational tenets of evidence-based investing to give you confidence when you think…

The Importance of Global Diversification

An investor’s ability to achieve their investment goals often relies on maintaining discipline in their portfolio over the long term. Diversification across securities, sectors, and countries can help investors maintain their focus, potentially allowing them to avoid extreme outcomes that may result from a more concentrated approach. However, short-term performance of individual markets may cause some investors to question the merits of diversifying across countries and consider reallocating to markets that have recently done well. In these times, it’s important to be reminded of the benefits of maintaining a globally diversified portfolio.    

Invest Now or Temporarily Hold Your Cash?

At some point in their lives, investors may receive a large sum of cash, such as a pension payout or inheritance. Finance theory and historical evidence suggest that the best way to invest this sum is all at once according to an investor’s asset allocation. Many investors nevertheless choose to put the money to work over time, a systematic implementation plan that is commonly referred to as dollar-cost averaging. We explore the benefits of both strategies, quantify the costs, and reach three conclusions that can guide decision-making. History and theory support immediate investment. On average, an immediate lump-sum investment has…

When Emerging Markets Outperform

Earlier this week, we looked at emerging markets and why many investors stick to domestic stocks due to two biases: home country and recency, despite a compelling case for emerging market investing. To more fully understand the case for global diversification, I’ll resume the discussion with an exploration of two studies related to emerging markets. The Importance Of The Book-To-Market Ratio Michael Keppler and Peter Encinosa, authors of “How Attractive Are Emerging Markets Equities? The Importance of Price/Book-Value Ratios for Future Returns,” which appears in the Spring 2017 issue of the Journal of Investing, provide us with some further insights as to…

There’s Still Time to Contribute to an IRA for 2016

There’s still time to make a regular IRA contribution for 2016! You have until your tax return due date (not including extensions) to contribute up to $5,500 for 2016 ($6,500 if you were age 50 by December 31, 2016). For most taxpayers, the contribution deadline for 2016 is April 18, 2017. You can contribute to a traditional IRA, a Roth IRA, or both, as long as your total contributions don’t exceed the annual limit (or, if less, 100% of your earned income). You may also be able to contribute to an IRA for your spouse for 2016, even if your…