“It’s tough to sell winners and buy laggards, but it’s smart.”

That is the lesson from MarketWatch’s, “Force yourself to rebalance your portfolio.”

Good advice. But difficult for most investors to follow.  (more…)

Alternative Indexing

I typically recommend smaller investors utilize passive investment techniques. That is, investing in open-ended no-load index mutual or exchange traded funds.

I have not mentioned that there are different ways to construct market indices. There are.

The normal market index is weighted by market capitalization. The bigger the company, the higher the weight in the index. The vast majority of index funds you consider will be this type.

But there are alternative indexing options out there too. I want to touch on them today.  (more…)

Financial Tips for College Graduates

U.S. News offers 10 financial tips for young adults.

Actually, financial advice for anyone starting out in the work world. Or even for those who have been working for awhile and now want to begin investing.

Good advice. A few comments from my side.  (more…)

Investors Shun Risk

A relationship exists between investment risk and expected return.

The safer the asset, the lower the expected return. The greater the investment risk, the higher the required return. Or it can be a tad more technical if you like.

Investors should take an objective view of investment risk. Unfortunately, investors tend to be emotional creatures and these volatile times lead people to become fearful of investment risk.

So what is happening? And what should you do as an investor? (more…)

Emotional Investing Decisions

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.  (more…)

Emotional Investing

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?  (more…)

Cash and Cash Equivalents

We shall start our look at the different asset classes this week.

I do not intend to go too deeply into many of the assets themselves. There are plenty of good definitions on the internet or in textbooks.

Rather, I want to look at the asset classes from an investing perspective.

How liquid are the assets? What are their risk and return profiles? What other factors impact their performance? How should you consider their suitability in your investment portfolio?

Today we will review Cash and Cash Equivalents (CCE). (more…)

A Little More on Diversification

Today we shall look at a few more areas of interest relating to diversification.

In An Introduction to Diversification, we saw that Investopedia recommends holding a “wide variety of investments” to benefit from diversification.

Further, that a diversified portfolio will generate “higher returns and pose a lower risk than any individual investment found within the portfolio”?

Is this true? What does it mean? (more…)

Diversification and Asset Correlations

In An Introduction to Diversification, we began our review of the subject.

Knowing something about asset correlations is crucial to better understanding why diversification is important in an investment portfolio.

So that shall be today’s topic. (more…)

An Introduction to Diversification

The key risk management tool for the average investor is portfolio diversification.

It seems like an easy concept, but it is a little more complex than it first appears. (more…)

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