By 2 Cents on November 1st, 2011 | Category: 20 Cents |  It’s hard to believe 2011 is already winding down. Soon we’ll be busy with holiday preparations, year end reviews and goals for 2012. It’s been a beautiful fall in our new city and I look forward to experiencing Christmas here for the first time. Now ~ 1. Where to find a tree? & 2. Where to put it in the new house? Hmmm . . .
While I wrestle with these profound questions, I’ll leave you with a selection of 2 cents from 10 different places. Enjoy!
1. Jonathan Burton of Market Watch wrote an interesting article on Why Geezers Give the Best Investment Advice. ‘Based on the evidence found in the research, anyone between 43 and 63 “is really in their cognitive sweet spot.”’ Woo hoo! I’m almost in my cognitive sweet spot! Wait . . . does that mean I’m almost [...]
Read on and enjoy … 20 Cents from October 2011
By 2 Cents on October 7th, 2011 | Category: Planning |  No one knows what they’ll do in a moment of crisis and hypothetical questions get hypothetical answers.
~Joan Baez
When I wrote Another Bear Market: Is It Time to Buy? earlier this week, I tried to summarize the current bull and bear points of view. I also promised to write about how we’re approaching the current market volatility. As I mentioned, I think everyone can and should have a unique response – including the possibility of having none at all – to the market’s gyrations. Our response, therefore, should not be taken as advice on what anyone else should do. It’s based on our personal situation and if that was different, my strategy would be different too.
Background
For those who aren’t regular readers, I’ll just give a quick bit of background on where we’re at financially [...]
Read on and enjoy … Personal Finance in a Secular Bear Market
By 2 Cents on June 21st, 2011 | Category: Investing |  Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for a lifetime. Teach a man to create an artificial shortage of fish and he will eat steak.
~Jay Leno
Today’s quote illustrates why it’s so hard to invest in markets. There are so many variables, and some of them may not even be apparent to us. You could become the best fisherman on the planet and still lose money if someone successfully manipulates the market for your catch.
A little more than a year ago, I wrote a two-part piece answering 8 questions posed by Kevin at Out of Your Rut. He was interested in finding out where his readers thought the stock market was headed. I gave some pretty detailed answers to his questions and, while I think I got a lot of [...]
Read on and enjoy … What’s Next for the Markets?
By 2 Cents on May 30th, 2011 | Category: Investing |  The future is an opaque mirror. Anyone who tries to look into it sees nothing but the dim outlines of an old and worried face.
~Jim Bishop
Most people would agree that it’s pure folly to try to predict the future – especially that of the financial markets. And yet we don’t want to invest blindly either. We need to have at least some concept of where we’re at in the economic and market cycle, as well as the future prospects and valuation metrics for any company we may choose to buy.
Every investment decision is a bet on the direction of a given company, sector, or index. I know some passive investors out there don’t think they’re making market calls, but buying any financial instrument is a wager it will be worth more by the time we sell it. Otherwise, why buy it in the first place?
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Read on and enjoy … Will the S&P Fall to 400?
By 2 Cents on April 6th, 2011 | Category: Investing |  Most of us can read the writing on the wall; we just assume it’s addressed to someone else.
~Ivern Ball
Market and economic commentary over the past few months has contained numerous references to walls. Setting aside the irony of the fact that the seat of American capitalism rests on Wall Street, we’ve also heard about the wall of water that washed over Japan and subsequently complicated the global macroeconomic picture. Add that to the Wall of Worry.
There are 3 kinds of walls mentioned in a lot of market discussions these days. Each one seems to take its turn in the spotlight and ironically, bulls and bears alike seem to be able to use all 3 walls to build their case. The one left standing may determine your investment success over the medium to long term. In the short-term, of course, anything can happen.
I’m talking about [...]
Read on and enjoy … Investing: 3 Walls to Watch
By 2 Cents on March 16th, 2011 | Category: Investing |  The following is Part Two of a two-part guest post from Rob Bennett. The first part (How to Use Valuation-Informed Indexing – Part One) was published on Monday.
(Schedule Note: I will be taking Friday off, so there won’t be a new post until Monday.)
The valuation metric (P/E10 — the price of an index over the average of its last 10 years of earnings) used in The Stock-Return Predictor to identify the most likely long-term return is research-tested. It has worked well for the entire 140 years of U.S. stock-return history available to us. For example, research by Wade Pfau, Associate Professor of Economics at the National Graduate Institute for Policy Studies in Tokyo, Japan, reports that Valuation-Informed Indexing beat Buy-and-Hold in 102 of the 110 rolling 30-year [...]
Read on and enjoy … How to Use Valuation-Informed Indexing — Part Two
By 2 Cents on March 14th, 2011 | Category: Investing |  The following is Part One of a two-part guest post from Rob Bennett. I asked Rob a couple of questions in a comment the other day and he was kind enough to answer them in the form of these two articles. My thanks to him for taking the time to do this. I found this information to be very informative and I hope you will too. Part Two will appear on Wednesday, March 16, 2011.
I advocate Valuation-Informed Indexing. This investing strategy is the alternative to Buy-and-Hold.
Buy-and-Hold is rooted in the research of University of Chicago Economics Professor Eugene Fama and assumes that overvaluation is a logical impossibility; thus, it posits that investors need not change their stock allocations in response to price changes. Valuation-Informed Indexing is rooted in the research of Yale University Economics Professor Robert Shiller and assumes that valuations affect long-term returns; thus, it [...]
Read on and enjoy … How to Use Valuation-Informed Indexing — Part One
By 2 Cents on February 25th, 2011 | Category: Retirement |  [Ed Easterling of Crestmont Research] favors us with yet another book, called Probable Outcomes: Secular Stock Market Insights, in which he takes on the mostly silly research, done by so many analysts, that purports to show what an investor can expect to make from his retirement portfolio over time. I can’t tell you how disastrous this simplistic analysis can be for retirees.
~ John Mauldin
Update: This article was included in the Wealth Builder Carnival #30 at Wealth Builder as well as the Carnival of Financial Planning #174 hosted by The Financial Blogger. Thanks!
I’ve got some Friday Food for Thought for you this week that fits in nicely with our recent discussion on passive investing and the dangers of investment dogma. It comes to us courtesy of John Mauldin’s most recent installment of Outside [...]
Read on and enjoy … Safe Retirement Withdrawal Rates and Probable Outcomes
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