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Category: Investing

Why I Prefer Dividend Income Over Total Return in Retirement

Why I Prefer Dividend Income Over Total Return in Retirement

The one constructive response I received on the article, A Portfolio Strategy for 30-Year Retirements, was the preference for total return versus dividend income. If you haven’t read it, I’d encourage you to do so now as what follows will make much more sense. Before we dive in, let’s first define total return investing. Total return investing is the idea that there is no preference for investment gains, whether via dividends or growth of underlying capital. The thought process here…

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Selling the Sizzle: Risk-Adjusted Returns

Selling the Sizzle: Risk-Adjusted Returns

Jerry Seinfeld is one of my two favorite comedians. (Mitch Hedberg is the other in case you’re wondering.) He has a great bit about dry cleaning where he says, The whole problem with dry cleaning is that we all believe that this is actually possible. They’re cleaning our clothes, but they’re not getting anything wet. It’s all dry. I know there’s got to be some liquids back there, some fluids that they’re using. There’s no such thing as “dry” cleaning….

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A Portfolio Strategy For 30-Year Retirements

A Portfolio Strategy For 30-Year Retirements

PLEASE NOTE: This is a long post, but I passionately believe that if retirees have any chance of getting things right, they must properly understand all the underlying assumptions they are making in their retirement planning decision process. And because I view the subject(s) of this particular article to be so important, I wanted all the thoughts in one place instead of being spread amongst three or four individual posts – especially since these issues are inseparable in nature. If…

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Softening the Edges of the Market

Softening the Edges of the Market

As I was sitting in traffic on my way to the office this morning, I thought of the opening scene of the movie Office Space. If you haven’t seen it, take one minute and watch the video, it’s so relatable!  As I was watching the drivers around me weave from lane to lane, there appeared to be a very clear connection to “chasing performance” from an investment perspective.  Chasing performance is the process of making investment decisions based on what…

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Why Average Market Returns Mean Nothing

Why Average Market Returns Mean Nothing

David Hultstrom of Financial Architects puts out a great quarterly newsletter for financial advisors (and a great one for investors as well). In the most recent version of his advisor newsletter, he posted the following chart below with some great commentary that I wanted to share with you. The average compound return (i.e. geometric) is 9.75% (red line). Only in 1992 did an annual return round to 10%. In only 5 out of the 93 years was it even within…

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Finding Your Investing Edge

Finding Your Investing Edge

I’m going to continue my poker theme. Last week, I drew a comparison between poker and your odds of success as an individual versus the best in the world. This time, we’ll discuss how fund managers compete against each other and where you might have an advantage over these fund managers. Let’s say you had the opportunity to walk the floor at the World Series of Poker. The final table is all set, so all that’s left is the best…

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What are your odds?

What are your odds?

Imagine your friend invites you out to play a friendly game of poker. You agree to go, because why not, right? Should be fun! Once you sit down at the table that evening, you find out that the players you’ve just sat down with are the best poker players in the world. They are the stars from the World Series of Poker – each of them accumulating millions of dollars in winnings. Like your chances to win the game? That’s…

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Investing Tenets That Are Hard to Follow

Investing Tenets That Are Hard to Follow

Putting cash to work rather than waiting for things to “settle down.” Being patient during flat markets. Staying optimistic when the market seems to be burning down around you. Selling out of a winning company or fund that you’ve held for a long time to diversify your risk. Voluntarily recognizing capital gains and paying the associated taxes to de-risk your portfolio. Evaluating your portfolio based on where you stand in relation to your goals rather than comparing it to a…

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The Problems With Behavioral Investment Advice

The Problems With Behavioral Investment Advice

In a recent Morningstar article titled, “Do Investors See Financial Advisors As Behavioral Coaches?“, Samantha Lamas discussed survey results regarding what investors find most valuable about financial advisors. What I found most interesting wasn’t what rated highly, but what rated poorly. In the survey, Morningstar asked individual investors to rank a specific set of attributes by order of importance. The list of attributes is here: In particular, many planners (myself included) believe one of the most valuable things we bring…

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10 Charts About Retirement Every Retiree Should See

10 Charts About Retirement Every Retiree Should See

As a Retirement Planner, I eagerly await the release of J.P. Morgan’s Guide to Retirement. It is essentially a booklet of slides filled with a ton of great information impacting retirees. Making it even better, it often highlights things that are regularly overlooked by just about anyone (including professionals) planning for retirement today. With that in mind, I’ve selected 10 charts that I think everyone transitioning into retirement should see with a little commentary on each. Every chart comes directly…

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