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Want to Invest Like a Pro?

On 01/24/2013, in Investment Strategies, by Jordan Wilson

Want to learn how to invest like a professional investor?

Maybe a good plan, maybe not. But our friends at Investopedia discuss how to “Invest Like a Pro”.

Article highlights and my comments below:

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Target Date Funds

On 06/18/2012, in Investment Strategies, Mutual Funds, by Jordan Wilson

I keep seeing target date mutual funds pop up in my daily readings. Presumably that means they are a popular item  at the moment.

I can understand why target date funds might be popular with investors. However, they are not investments I would normally recommend to clients.

Here is why. 

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I believe that successfully growing wealth over the long term is more about the financial planning process than just the actual investment selections.

That is why I preach a holistic approach to wealth management. Know who you are as an investor (i.e., Investor Profile). Build a written, comprehensive Investment Policy Statement reflecting your unique situation.

Financial success is more than just investing alone. 

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Readers know that I believe investors should create written Investment Policy Statements.

Having the Investment Policy Statement in writing helps with focus and self-discipline in both the creation and implementation of your investing plan.

And it is not just me that thinks written statements improve investor results. 

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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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HighTower Advisors has created a great video comparing investment brokers with fiduciaries.

A broker is someone who takes a fee in exchange for executing a transaction. They provide a service in return for compensation. For the most part, a broker is not a fiduciary. However, brokers – depending on where they reside, professional qualifications, company, regulatory oversight, etc. – may have certain duties of care to their clients.

A fiduciary is someone with a legal duty of care to the client. It is more than simply executing transactions. More as if the fiduciary steps into your shoes to try and best meet your needs.

It is an important distinction. Make certain that you always know whether you are dealing with a fiduciary or not. I am not saying never to deal with a non-fiduciary. Only that you know the difference between the two. And, if appropriate, take steps to safeguard your best interests over those of your representative (agent, banker, broker, financial planner, etc.).

Now to the HighTower video. 

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Many readers are a long ways away from retirement.

Messing up on retirement is not yet on one’s radar.

But it should be.

And the sooner you realize how people mess up retirement, the easier it is to avoid problems. 

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You should compare your portfolio’s performance against predetermined target benchmarks.

We have already covered a few useful benchmarks.

Arbitrary return figures such as nil, the risk-free rate, or a required rate of return based on your needs.

Relevant publicly available indices that reflect the composition and risk of your actual portfolio.

If investing in funds, comparing your portfolio returns and expenses against the funds’ peers.

There is one other important benchmark that we have not yet covered. 

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Buy and Hold, But Review

On 04/29/2011, in Investment Strategies, by Jordan Wilson

In general, I like the buy and hold investment strategy.

Assuming, that is, you passively invest in a well-diversified, low-cost portfolio.

But I also think that a buy and hold strategy needs a little tweaking.

One such tweak involves the need for periodic portfolio reviews.

Today we will look at frequency of reviews.  

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Asset Allocation: Common Shares

On 02/09/2011, in Asset Allocation, by Jordan Wilson

The final core asset class is common shares.

Yes, I know the final class is equities, but I consider preferred shares to be more fixed income in nature.

We can also use percentage allocations for these equities.

Once again, the right allocation is determined by your own comprehensive investor profile. Keys include your current financial situation, phase in the life cycle, and risk tolerance.

Here are a few thoughts from my side.

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