Risk in stocks and bonds–Seventeen years of returns
When should someone retire? The answer may be fraught with danger if the retirement portfolio is overly weighted to stocks or other risky investments. There is one small window of time surrounding the retirement date in which sharp declines in stock values can ruin retirement. Continue reading
Risky? These women compete in a roller derby where they skate, block and score on a concrete floor. There is risk—in the sense of loss or injury. “No pain, no gain,” analogizes the SEC, which is almost a sports metaphor: play hard, risk injury and you may win.
There are standard narratives about investing that lead people to particular strategies. Risk, we’re told, infects all investments, and it is often viewed as potential injury or loss. Continue reading
Last weekend TV viewers watched the beginning of the third season of BBC’s Downton Abbey, a story about an aristocratic family in England in the 1920s. Sir Robert Crawley, Earl of Grantham, with his family and staff, live on investments in a splendid castle.
Last July readers of this blog met Alice, a model retiree, who also lives on investments and manages her portfolio of four different index mutual funds. Moreover, Alice has Social Security and a pension, both of which postdate Lord Grantham. Continue reading
In Charge
Can you imagine a world where people who followed a few simple guidelines about diet and exercise but never visited doctors had health outcomes as good as those who do see doctors? Can you imagine a world in which wonderful music might come from people who played instruments but had little musical knowledge, training or experience?
Photo by PicketAces, Thomas Picard, Brooklyn, N.Y.
Active retail investors earn lower returns than their passive counterparts—it is a major theme here at Later Living. Today I’ll add one more argument for passive investing: active investing exposes retirees and others to greater likelihoods of dishonesty and conflicts of interest. Continue reading
In midcareer, people need to get along at work, and in retirement people must get along with their investments. At work in middle life, and with investments in retirement, getting along includes people, but it also involves the circumstances, tasks, and procedures in each setting.
Retirees can manage their own investments as they managed their work, but to do so, they should grow familiar with their assets, understand asset allocation and rebalancing, and keep a steady discipline concerning withdrawals.
One good way to gain confidence with managing a retirement portfolio is to work through a model program year-by-year. Continue reading
Last week we added Real Estate Investment Trusts (REITs) to a retirement portfolio, and this week we add international investments. The completed portfolio will now have domestic stocks, domestic bonds, REITs, and international stocks. Just these four investments can carry a retiree a long way into efficient, reasonably stable returns.
Why international investments? Diversification and growth are the best answers. Fifty years ago the United States dominated the world of investment opportunities, but today many countries have growing economies, well-run innovative companies, and good opportunities for investing. Continue reading
Good investment literature always recommends diversification. It counsels investors to forget about trying to pick the next Apple or Microsoft. That is a guessing game, and the odds are against small investors. Here at Later Living, I have followed the literature and used example portfolios consisting of broadly diversified stock and bond index funds. Today I will include real estate, or REITs, in the retirement portfolio.
REITs are real estate investment trusts, and they owe their modern form to legislation enacted in 1960 and subsequently modified. REITs provide investors easy ways to participate in investments like apartments, office buildings, shopping centers, timberland, and others types of income-producing real estate. Continue reading
Warren was recently interviewed for a short piece in Investment News about empowering individuals to manage their own investments.
Read the full article here. Free registration required, but if you don’t want to register, you can bypass registration by clicking here to Google search for “Warren Flick Investment News” and then clicking on the first result.
Investments can be complicated, but they don’t need to be. Investors just need to know their objectives and some intelligible ways to achieve them. Generally, investors want high returns and low risk. Once they achieve suitable exposure to both, rebalancing—maintaining balance among components—keeps investors on a steady course.
High returns usually come from owning stocks. History has shown that over long periods of time, stocks almost always out perform bonds, real estate, and many other investments. Alternatively, stocks are often risky.
Bonds usually produce lower returns, but they tend to be less risky. A portfolio that combines a diversity of stocks and a diversity of bonds is likely to generate good returns with only moderate risk. Continue reading