Tuesday, April 19, 2011

The Biggest Urban Legend in Finance

We normally assume that since stocks have higher risk than bonds that they will perform better. This is an excellent piece by Research Affiliates that shows that this is not necessarily the case. The next time a broker tries to tell you that stocks always outperform bonds show him this.

The Biggest Urban Legend in Finance

Saturday, April 9, 2011

The Asset Allocation Fallacy

The Asset Allocation Fallacy

The idea that as you get closer to age 65 you should start shifting into mostly bonds not only makes no sense it is dangerous. First of all, bonds are not necessarily safe, they appear that way because we have been in a declining interest rate environment. If interest rates increase then bonds will lose value. Second, even at age 65 you still have a long time horizon, with increasing life expectancies you could live until 100 or beyond. Putting most of your money in vehicles earning 3-4% almost guarantees you will run out of money at some point.

Friday, April 8, 2011

Muni Tax Break Under Siege

Muni Tax Break Under Siege

We have never been a big fan of retirees putting all their money into municipal bonds and living off the interest but the fact remains that this is how many retirees fund their lifestyle in retirement. If this law was to pass it would mean a fundamental shift in how people plan in retirement. Such a shift is already taking place as the Fed has kept interest rates so low for so long impacting other traditional retirement income vehicles like CDs and bonds.

Monday, April 4, 2011

Eventual Millionaire Interview

I was recently interviewed for a podcast for Eventual Millionaire click here to listen to the podcast.