Sound Advice

Finances: Not for Men Only If you are a spouse, a single career woman or perhaps divorced or widowed, it's more than likely that you have little familiarity with matters of financial planning.   After all, money is stuff for men to handle, right?   Unfortunately, that's absolutely wrong. I remember more than a few occasions over the years when I've met with women whose first question was "What do I do now?"   In some cases, the question came from women who were successful in their chosen careers, but largely uninformed about how to handle the assets they had accumulated.   In others, it came from those who were now on their own due to failed marriages or the passing of a spouse.   Whichever the reason, the reality is that financial planning is not a club that's exclusive to men. Although this is not a new suggestion, it's one that hasn't been given sufficient attention, which is why more than a few women still feel uncomfortable dealing with fina...

The problem with most investment accounts Most people are not equipped to handle their own investments.   Everyone is looking for substantial rewards, but most of us ignore the fact that greater potential for reward means more risk is involved.   How do you limit risk? By diversifying.   But that's usually the hitch.   Just because you own a half dozen mutual funds or stocks doesn't mean your portfolio is diversified.   More often than not, it will mean just the opposite if the underlying holdings of the funds you hold are similar, which they often are.   That's frequently the case with stocks, too.   If you hold a dozen stocks in related industry sectors, that will magnify, not lessen, the overall risk. The goal of diversification is to hold a variety of securities that don't all move in the same direction.   Equities do well sometimes and are extremely disappointing in others.   During periods when interest rates area being reduced, b...

Why Asset Allocation is Important Although asset allocation and diversification are words that are regularly used when thinking about proper portfolio construction, more often than not lip service is not followed by actual attention to the process of putting together a grouping of investments that makes sense.   What makes sense is a collection of securities within a variety of asset classes with the objective of gaining worthwhile returns while limiting risk exposure. It's not hard to do. One traditional approach to asset allocation has been a 60/40 split between stocks and bonds, decreasing the percentage allocation to equities as investors get older.   This has not been a bad way to go, but simply thinking in terms of U.S. stocks and bonds overlooks the opportunities available by considering a wider variety of asset classes, including international stocks, real estate, and high yield (a.k.a., junk) bonds. A few years ago, I completed a study of asset class returns f...

  Does January predict the full year? One of the well-known Wall Street tales is that whatever happens in January is likely to be a good indication of how the rest of the year will be.   In the interest of getting a better understanding of the probabilities, I studied the returns of the Standard & Poor's 500 for the last 50 years.   The results of that study give some assurance that January may point the direction for the months that follow, but the early going is by no means a guarantee of what's to come. Let's start with the reality that over extended periods of time two out of three years will show positive returns.   So when we look at the span from 1968 to 2017, we learn that (after excluding years that showed gains or losses less than 2%), exactly two out of three years registered significant gains.   That was as expected. More interesting is the fact that in the years when the January number was positive, three quarters of the time the full-year...