Investor Education

If you have a lump sum that you wish to invest, you have a choice. You can either invest it all at once, or you can invest it over time.

Dollar cost averaging is a strategy where you invest a set portion of your lump sum at regular intervals over a specified period. For example, if you have $12,000 to invest, you might decide to invest $1,000 at the beginning of every month for the next year.

Dollar cost averaging is different than deciding to invest a set amount each month out of your paycheck or through a retirement plan like a 401(k) plan. Those strategies do not involve the investment of a lump sum of money over time.

Below we have outlined performance statistics for different asset allocations spanning from 100% Equity to 100% Fixed Income. This analysis is for illustrative purposes only, but demonstrates the impact of asset allocation on portfolio performance.

Fees and expenses are two of the most important factors to consider when investing. You can’t control the direction of the financial markets, but you can control what you pay to invest.

Every mutual fund or exchange traded fund (ETF) in your portfolio has what’s called an “internal expense ratio.” This is the amount charged by the fund company for managing the fund.

A well-designed portfolio is built to achieve an investor’s long-term financial goals within limits on portfolio volatility that are determined by the investor’s tolerance for risk.

Building such a portfolio can be accomplished by thoughtfully combining “asset classes” with different performance characteristics in a diversified portfolio.

Stocks are often grouped into two distinct categories or styles, growth and value.

Knowing the differences between the two and how to incorporate them into a portfolio can help investors smooth out the ride toward their long-term financial goals.

Investors often ask, “When I build a portfolio comprised of stocks and bonds, should I use short-term, intermediate-term, or long-term bonds?”

The answer is: “It depends.”

Most people are surprised to find that they hold the key to their own investment success. But it’s true. An investor’s behavior is the most important factor in determining success.

Here’s why. You can be invested in the most perfect portfolio, but if you abandon the strategy before it has a chance to work for you, you won’t be a successful investor.

When investors make decisions on their own, many end up making costly mistakes. For many years, Dalbar¹ has studied the differences between investor performance and the performance of the financial markets. Every year the news is grim when it comes to investor performance.

Tracking error measures the variation in performance between a portfolio and its benchmark.

The main cause of tracking error is the difference in the holdings of the portfolio and the benchmark. Typically, the greater the difference in holdings, the greater the tracking error.

Direct indexing is a way to create a broadly diversified portfolio of individual stocks that are personalized to meet the needs, values, and preferences of an investor.

There are two approaches to building a portfolio that individuals commonly take in preparing for retirement. One is the “income” approach and the other is the “total return” approach.

Tax loss harvesting involves intentionally taking a loss by selling a security that has declined in value, in order to receive a tax benefit. By selling a security that has experienced capital losses, this investor can then offset gains and reduce taxable income. This strategy is often used to optimize tax efficiency in an investment portfolio.

Tax alpha measures the benefits of decisions made by a portfolio manager that are designed to improve the
after-tax return of a portfolio. These decisions come in two forms: tax-loss harvesting and tax deferral.

Buying low an selling high can be an elusive dream for most people.

The stock market goes up and the stock market goes down, as you can see below. Over time the trend is strongly upward, but there have been significant market declines along the way.

It is not uncommon for investors to make predictions about the direction of interest rates and then make investment decisions based on those predictions. These predictions may be based on specific forecasting models or simply on gut feelings about the direction of interest rates.

The US and international stock markets can be broken down into groups of stocks based on the size of the issuing company. Understanding those groups and how to incorporate them into a portfolio can help investors better reach their long-term financial goals.

At a recent conference, our firm used a “guess-the-number-of-jellybeans-in-the-jar” contest to boost traffic at our booth. The results of the contest were thought provoking, and a valuable lesson about guessing the direction of the stock market.

Almost everyone has heard that diversification is important in building portfolios. However, many people don’t understand what it is, why it’s important, or how to maximize its benefits. 

Diversification means spreading the assets in a portfolio among different investments. 

US stocks have outperformed international stocks for the better part of the last 10 years. During that time, US firms, generally, have grown faster and been more profitable than international firms. The US has less regulation and a better business environment than most international markets. Many US firms are global market leaders and just seem more innovative than international firms.

Factors are characteristics common to a group of securities that help explain their returns. These characteristics are distinct and quantifiable and give rise to similar patterns of performance among the securities within the group that distinguish them from other securities over time.

Why invest internationally?

That’s a question many investors ask given the uncertainties of world events and the relative comfort and familiarity most US investors have with our domestic markets. Here are some good reasons a portfolio should include international investments.

There are many ways an investor can end up holding a large, concentrated stock position. There are also many reasons why an investor may be reluctant to diversify away from that position. But holding a large, concentrated stock position comes with significant risks.

Behavior determines success. You can be invested in a portfolio that is perfectly designed to help you achieve your specific goals, but if you don’t stay invested, your chances of reaching your goals will be diminished.

There are many ways an investor can end up holding a large, concentrated stock position. There are also many reasons why an investor may be reluctant to diversify away from that position. But holding a large, concentrated stock position comes with significant risks.

ETFs are professionally managed, diversified portfolios of stocks, bonds, or other assets that are traded on an exchange. Let's discuss the basics of these Exchange Traded Funds from their inception in 1993 to today, and how they may fit into your broader investment strategy.

Inflation is a measure of how much prices for goods and services are rising in an economy. Inflation can be caused by a number of factors.

Demand-pull inflation occurs when there is more demand for goods or services than the current supply can meet. This allows companies to raise prices in the face of excess demand.

Cost-push inflation occurs when cost increases make it more expensive for companies to produce the same goods or services. Companies raise prices to maintain their margins.

Treasury Inflation-Protected Securities, or TIPS, are a type of bond issued by the US Treasury. They are backed by the full faith and credit of the US government and were first issued in 1997.

TIPS are issued with maturities of 5, 10, and 30-years and in multiples of $100. They can be purchased directly from the US Treasury or through secondary markets.

Like traditional Treasury bonds, TIPS pay interest every six months, and their initial prices and interest rates are determined at auction.

Both the SEC and FINRA require performance-based advertising and sales literature to include the statement: “past performance does not guarantee future results.”

Is that good advice?

Since most of the hard work that goes into managing our portfolios is not apparent to an outside observer, some prospective clients ask, “Why don’t I just manage my own portfolio?”

There's more to it than meets the eye.

Should Gold Be a Part of Your Portfolio?

Gold is beautiful to look at and has a rich history, but does it belong in your investment portfolio? The information below will help you answer that question.