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Portfolio Solutions Blog

December 01, 2015

I’m often asked to recommend a simple index fund portfolio for people who are just getting started with passive investing and want to learn the basics. There are several good portfolios you can build to suit your needs using a few funds that require little maintenance. Balanced index funds are also a good option for people who don’t want to do any maintenance.

All the portfolios mentioned in this article are balanced between stocks and bonds. The percentage you should allocate to each asset class depends on your financial goal, time horizon and ability to tolerate market volatility...

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November 01, 2015

Nearly every financial advisor will tell you that foreign stocks should be part of a well-diversified portfolio. Yet, an analysis of the data shows that non-US (foreign) stocks as an asset class have underperformed the US market by a meaningful amount for more than 40 years, in addition to having higher risk. So, why do it?

Despite their shortcomings, I’m still a believer in foreign equities as part of a well-diversified portfolio. The allocation has created a higher risk-adjusted return, and there is the potential for higher nominal returns in the future.

Since 1970, the...

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October 07, 2015

Investment discipline isn’t easy. Despite best intentions and claims to the contrary, many investors chase performance, react emotionally to market moods, and generally incur far more trading costs than good discipline would suggest. Even when there is a long-term plan in place, if it’s not followed, the plan is useless. Over the years, I’ve seen good intentions go by the wayside time and again because discipline was not followed.   

These observations aren’t limited to individual investors. I’ve seen similar conduct from investment...

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October 01, 2015

If you are interested in index funds, it is likely that you own shares in a U.S. total bond market fund or ETF. There are roughly $160 billion invested in total bond market funds and ETFs, most of which follow the Barclays Capital U.S. Aggregate Bond Market index or a derivative of it. This index is widely considered to be “the benchmark” for the U.S. investment grade bond managers. Truth be told, it’s not the best representation.  It’s less — and it’s more.

The Barclays Capital U.S. Aggregate Bond Market Index and the newer U.S. Aggregate Float Adjusted Index are composed of...

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September 23, 2015

“Ignorance is bliss,” or so the saying goes. Unfortunately, as it applies to Wall Street, that bliss is more likely to go to those preying on investors’ ignorance than by those who remain financially naïve. That’s why it’s so important for investors to arm themselves with understanding, at least of the financial basics. For example, here’s one of my favorite lessons: The less you spend on investing, the more you get to keep.

I feel for investors who don’t manage their costs, because they pay a dear...

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September 17, 2015

In the market’s never-ending story, we never know how its most recent action will play out. One thing we do know is that when the market is more volatile than usual, investors who lack a personalized, long-term plan to guide their way are far more likely to make the wrong moves by the time the cycle is complete. In our opinion, every investor’s long-term plan should include embracing a buy, hold and rebalance approach to investing. This is one of the simplest and most effective ways to diversify and it may help you prosper in various financial markets...

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September 08, 2015

You’ve just received a lump sum of cash. Perhaps it was from a rollover retirement account, the sale of assets, or an inheritance. Now what do you do? Your first thought may be to spend it. That’s always an option – and probably the most fun option. The less-fun decision is to invest it. This is especially less fun if you’re unfamiliar with how all that works. It’s no wonder one of the most frequent questions I am asked is how to invest lump sums of new cash.

One of the first decisions to make is whether to invest the proceeds all at once...

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