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Dangers of Dividend Funds

On 05/13/2012, in Equities, Mutual Funds, by Jordan Wilson

Dividend funds are currently very popular with investors.

In many parts of the world, interest rate yields are quite low on a historical basis. To enhance returns, fixed income investors have turned to riskier investments that may offer higher yields. Such as dividends on preferred shares or dividend paying common shares.

As well, general equity investors are turning to perceived “safer” equity investments. Common shares in large, dividend paying companies. Shares that provide capital gains potential over time, but are back-stopped by a (hopefully) steady stream of dividend income.

Sounds like a good strategy to me. But there are always risks when investing.

Here are a few things to consider when assessing dividend funds (or dividend paying shares). 

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Benjamin Graham Investing Principles

On 03/14/2012, in Investment Strategies, by Jordan Wilson

I mentioned Benjamin Graham in “Mistakes of Warren Buffett” and recommended his book, “The Intelligent Investor”.

Benjamin Graham mentored Warren Buffet and is considered the founder of value investing.

Today, a quick summary on Benjamin Graham and his three key principles for value investing. While they may not turn you into the next Warren Buffett, these investment tips will make you a better investor. 

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Emotional Investing Decisions

On 01/19/2012, in Investment Strategies, by Jordan Wilson

Investing based on emotions or instincts is a difficult issue.

So challenging that an entire field, Behavioural Finance, examines how investor psychology and emotions affect investment decisions.

Recently I read an article where the author believes that financial planners prefer clients with little investment knowledge. That way, it is easier to sell them whatever you want.

Yes, there are financial planners, brokers, etc., that operate this way. But in my experience, good financial planners would rather deal with well-educated investors.

And often the reason relates directly to emotional investing. 

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Vanguard Investment Funds

On 12/03/2011, in Exchange Traded Funds, Mutual Funds, by Jordan Wilson

I like Vanguard investment funds for long term individual investors.

Especially investors who follow a passive management style.

As I am not directly or indirectly compensated in any way by Vanguard I recommend them based solely on their merits.

That is not to say that other funds are poorer choices. I recommend a wide variety depending on a client’s investment objectives, desires, and available offering in their home jurisdiction. I believe in a “best of breed” approach for clients, not what is best for my revenue. And within the “best of breed” options, Vanguard funds pop up with regularity.

Why is this so?  

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Recession Babies?

On 11/30/2011, in Asset Allocation, Investment Strategies, by Jordan Wilson

Younger investors should be willing to take on the most investment risk.

This is due to the classic risk-return tradeoff from Investing 101. The greater the risk assumed, the higher the expected return over time.

However, young investors today are shying away from risk in their portfolios.

Why is this the case?

Is it because young investors were “recession babies”? 

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As you get older, does your financial knowledge decrease?

Good question.

I do not think financial smarts necessarily fall with age. I know a lot of very smart investors of advanced years. However, a new study has come out that finds investing intelligence does decrease over time.

A scary thought. Especially for my 20 something nephew – nephew by marriage I like to point out, definitely not the same gene pool – who seems to already be lagging in this area. 

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Emotional Investing

On 09/21/2011, in Investment Strategies, by Jordan Wilson

Investment markets have resembled roller coasters in recent times.

Up, down, sideways, making many investors sick to their stomaches.

While investing is an emotional experience at any time, this turbulent period makes things even worse for lots of investors.

So what should you do? 

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SmartMoney.com recently issued a short video entitled, “Why ‘Buy & Hold’ Strategy No Longer Works”.

I am a proponent of the “buy and hold, but rebalance” approach, but thought it useful to provide a differing view. Not one I agree with, but it is always good to show all sides of a topic and let readers reach their own conclusions.

The video and my commentary are below. 

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Should investors be buying gold?

A good question for today.

An equally good question is should you rely on expert advice?

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There are two simple ways to rebalance your investment portfolio.

While these methods work best for investments in diversified assets such as mutual and exchange traded funds, they can also be employed for non-diversified assets as well.

Perhaps your target asset allocation is 70% U.S. equities and 30% U.S. bonds. Within the target allocation you have an acceptable absolute range of +/- 10%. After your latest portfolio review, you find that your actual asset allocation in 55% U.S. equities and 45% U.S. bonds.

You need to bring your portfolio back in line with your target allocation.

What do you do? 

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