Archive - June 5, 2013

1
Asset Allocation With No Reservation
2
Low Rates Make Retirees Gnash Their Teeth
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Recent Market Advances Fail To Overcome Mental Accounting

Asset Allocation With No Reservation

Did you review your portfolio this year?

Before coming into this business, I thought I was diversified by having my investments in a Vanguard S&P500 index mutual fund. I figured. Hey, I’m across 500 stocks, that’s diversification. In reality, all my holdings were in one asset class, large-cap domestic stocks. Real diversification includes many categories of investments including but not limited to small stocks, large stocks, international stocks and bonds.

As far as asset-class winners and losers, the last time large stocks gave the highest return was in 1998. Since then, bonds and international stocks performed better. So why diversify? …

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Low Rates Make Retirees Gnash Their Teeth

How are low interest rates effecting retirees? This is the question Chris Kissell, reporter for Fox Business, recently asked me.

Should retirees be putting their low (or no) interest yielding cash into stocks or bonds in order to generate some return? Absolutely not.

Even getting a sad-sack 1% return is better than exposing all your savings to higher levels of risk, says Alan Moore, founder of Serenity Financial Consulting in Milwaukee.

“I look at cash as market insurance,” he says. “When the stock market takes a dive, (retirees) don’t want to be in the position of having to sell stocks

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Recent Market Advances Fail To Overcome Mental Accounting

The S&P 500 has nearly doubled in the last four years. Yet many investors are left feeling more disillusioned with their investments than ever before. Some of this discontent can be combated by understanding the psychological effects of market volatility.

At the intersection of economics and psychology lies the exploding research on behavioral finance. This field of study often focuses on so-called heuristic biases that are observed when humans consistently make different decisions than a robot.

People strongly prefer avoiding losses to seeking potential gains. This preference is called loss aversion. Psychologists Daniel Kahneman and Arnos Tversky tested this behavioral …

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