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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Advantages of Lump Sum Investing

On 03/03/2011, in Investment Strategies, by Jordan Wilson

I am a proponent of dollar cost averaging (DCA) for most long-term investors.

But there are certain advantages to lump sum investing versus DCA. In fact, many studies conclude the lump sum approach is the better way to invest.

But we will consider this issue as we go through the DCA debate.

For today, I want to try and explain the shortfalls of DCA so that you get a clear picture as to the two approaches.

When we have covered both sides, you can decide what is best for you.  

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In my last post, I indicated that investors should normally not compete against professionals.

That does not mean you cannot rely on their skills in an attempt to enhance your own portfolio returns. In fact, many investors follow analyst recommendations and invest in mutual funds that are actively managed.

Whether this is a prudent investment approach is something we will look at.

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Mutual Fund Survivorship Bias

On 10/03/2010, in Mutual Funds, by Jordan Wilson

Analyzing mutual fund performance may seem straightforward.

Look at a fund’s results for different time periods. Then compare the returns against peers and benchmarks. And away you go.

Unfortunately, relative performance can be distorted through survivorship bias.

Today we will look at this issue and its close relation, creation bias.

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Fund Performance is a Relative Concept

On 09/28/2010, in Mutual Funds, by Jordan Wilson

Investment returns are difficult to assess in isolation.

What does it mean if an asset has an annual return of 10%? Is it good, bad, or average?

To answer that, results must always be placed in context to be of any informative value.

That brings us to the topic of relative performance.

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