WHAT is an Investment Policy Statement, or IPS? Your IPS is a written agreement, signed by you and your advisor when it is created, as well as whenever it is updated. It should include descriptions of the factors influencing your investment experience, such as: Designing your portfolio You & your financial situation – You and your family’s goals & timeframes. Are you adding to the portfolio, or taking distributions? Are your...

What is asset location and why does it matter to you as an investor? Let’s begin by noting that asset location should not be confused with asset allocation, which we addressed here. The two are related, but each makes its own contribution to your investment experience. Asset allocation (as described here) is about spreading your money among different asset classes, based on the amount of market risk and expected reward inherent to each. ...

What is rebalancing? Why and when should an investor do it? “Buy low, sell high.” The expression is so familiar that it’s become a cliché. And yet, few investors actually follow this most basic advice. Instead, they panic and sell (low) during market crises and chase already-hot stocks at premium (high) prices. Deliberate rebalancing is one of the best ways we know of to more consistently buy low and sell high while staying on track...

What other single action can you take to simultaneously dampen your exposure to a number of investment risks while potentially improving your overall expected returns?   What is diversification? In a general sense, it’s about spreading your risks around, widely and globally. In investing, that means it’s more than just ensuring you have a lot of holdings, it’s also about having many different kinds of holdings. If we compare this to the adage of...

WHAT ARE ASSET CLASSES AND WHY DO THEY MATTER TO YOU AS AN INVESTOR? Asset classes are categories (classes) by which we organize individual securities (assets) that share significant factors. There are broad asset classes for stocks (equities), bonds (fixed income), cash, and real estate. Within these broad classes, there are narrower asset classes focusing on the drivers of returns: For stocks, they may be based on: company size (small vs. large), relative price (value vs. growth), and profitability (high...

Businesses, Stock Markets & the Economy The Stock Market Is Smarter Than All of Us (Ben Carlson, CFA) “In The Wisdom of the Crowds, James Surowiecki writes: “The idea of the wisdom of crowds is not that a group will always give you the right answer but that on average it will consistently come up with a better answer than any individual could provide.” The same is true of the stock market. The stock market isn’t...

Businesses, Stock Markets & the Economy 12 Things I Remind Myself When Markets Go Crazy (Ben Carlson, CFA) Why Valuations Probably Won’t Matter For a While (Ben Carlson, CFA) Your Finances & other Wealth Management links Here’s What You Need To Know About Your RMDs (Abacus) Having an advisor help you manage your portfolio does not constitute 'giving up.' (retirementfieldguide.com) How to write your own 'legacy letter.' (humbledollar.com) Visualizing Net Worth by Age in America (Visual Capitalist) The Briefing The...

Businesses, Stock Markets & the Economy Think Investing Is a Game? Stop. (David Booth, Executive Chairman and Founder of Dimensional) “Indexing has turned out to be a good solution for many people. I was involved in the creation of one of the first index funds early in my career, and I’ve enjoyed watching the positive impact indexing has had on the industry. For those who want more customization and flexibility, there are...

Businesses, Stock Markets & the Economy America’s deeply unequal economic recovery, explained in 7 charts. “The pandemic has made employment disparities in America more evident than ever.” (Vox) Unfortunate Investing Traits (Morgan Housel) “An iron rule of investing is that almost nothing is certain and the best we can do is put the odds of success in our favor. Since we’re working with odds – not certainties – it’s possible to make good...

Businesses, Stock Markets & the Economy What Investors Should Know About Recent “Flash Mob” Trading (Schwab Center for Financial Research) “… much of the latest market activity has not been driven by traditional investors or based on traditional fundamentals. It’s been driven by trading activity in both the options market and small subsets of stocks, including those most heavily shorted by hedge funds, as well as low-priced “penny stocks,” weaker-balance-sheet companies, and...