Here is Part VIII of the Quotable Guide to Passive Investing. Part I is here. To scroll through Parts II to VII, click on links at the bottom of each page.
The Only Guide to a Winning Bond StrategyLarry E. Swedroe and Joseph H. Hempen
“The eight types of fixed-income risks are interest rate risk, credit risk, reinvestment risk, inflation risk, event risk, tax risk, liquidity risk, and agency risk.”
“The concept of duration allows investors to compare the price risk of bonds that have different maturities, call dates, and coupon rates.”
“If you ever purchase an individual bond be sure that you ask the dealer to disclose both the yield-to-worst and the yield-to-maturity.”
The broker-dealer community knows that individual investors lack sufficient knowledge about the bond market which makes exploiting them as easy as ‘taking candy from a baby.'”
“The winning strategy in fixed-income markets, whether taxable or tax-exempt, is to choose the lowest-cost fund that meets your credit and maturity criteria.”
“Unfortunately, the longer the maturity, the higher the correlation of fixed-income assets to equities.”
“Limit the taking of credit risk to the short to intermediate term and to also limit the taking of credit risk to the highest investment grades.”
“As the credit rating decreases, the correlation with equity returns increases. This is a strong negative feature of lower-rated bonds.”
“The main purpose of fixed-income securities for most investors is to provide stability to their portfolio, allowing them to take equity risk.”
“The risks incurred when investing in preferred stocks make them inappropriate investments for individual investors.”
The Only Proven Road to Investment SuccessChandan Sengupta
The most unrealistic expectation people have about investing–especially investing in stocks–is that if they work hard and smart or can find the right advisor, they can improve their investment returns.”
“Your best bet is to keep investing regularly in a broadly-diversified index fund ignoring whether you or others think the market is too high or too low–.”
“You should switch all your investments in stocks to index funds as soon as possible, after giving proper consideration to any tax consequences.”
“There is overwhelming evidence that the simplest possible investment method works much better than all the other more complex ones.”
“Should you keep buying even if the market is going down? Absolutely. That is the best time to buy.”
“You should have no expectations about short-term and year-to-year returns on stocks.”
“In investing we are our own worst enemies.–our emotions get in the way.”
“Try to ignore the news as much as you can.–Acting on any of that information will almost certainly do more harm than good.”
“Stay away from the major full-service brokerage houses.”
“Over the years the Vanguard Group has stood head and shoulders above other fund companies in giving the interest of the investors the highest priority.”
“To succeed, you must follow your investment plan with discipline, year after year, decade after decade. The simpler your investment plan, the easier it will be to stay with it.”
The Probability of FortuneMosheMilevsky
“Given the enormous competition that exists in the marketplace, and given the sheer number of individual analysts and institutions that are searching for undervalued stocks, I am somewhat skeptical about anyone’s ability to consistently beat the market.”
“Correlation is the key and secret to diversification’s success.”
“Buying 10 stocks or 10 mutual funds can be just as risky as buying one stock or one fund, if they are all in the same general economic and financial sector.”
“It is extremely important that you not annuitize too early in your retirement years.”
“If you can’t handle the short term, if the uncertainty is stressful and the headlines are unbearable, then the markets are too hot for you: get out of the kitchen.”
Protecting Your Wealth in Good Times and BadRichard A. Ferri
“When we get down to the basics, we are our own worst enemy. We are prone to have warped perceptions of our ability that cause us to act irrationally.”
“The best strategy is to hold a diversified portfolio that contains all types of stocks and stick with a constant mix.”
“Let’s face it: most investment companies are in business to make money from you, not for you.”
“Investing in bonds may not be as glamorous or exciting as investing in the stock market, but their steady return serves as a stabilizer in a portfolio.”
“Young adults who think they are blessed with market smarts are lucky if they lose money early in life. That makes them humble and respectful of market forces.”
“Early savers need only two or three no-load mutual funds to fill an investment portfolio. Start with a total U.S. stock market index fund and add a total bond market index fund.”
“Ensure the investments you hold have a low correlation with each other.”
To be continued here.
Blogs & Comment
Quotable guide to passive investing (VIII)
By Larry MacDonald
Here is Part VIII of the Quotable Guide to Passive Investing. Part I is here. To scroll through Parts II to VII, click on links at the bottom of each page.
The Only Guide to a Winning Bond StrategyLarry E. Swedroe and Joseph H. Hempen
“The eight types of fixed-income risks are interest rate risk, credit risk, reinvestment risk, inflation risk, event risk, tax risk, liquidity risk, and agency risk.”
“The concept of duration allows investors to compare the price risk of bonds that have different maturities, call dates, and coupon rates.”
“If you ever purchase an individual bond be sure that you ask the dealer to disclose both the yield-to-worst and the yield-to-maturity.”
The broker-dealer community knows that individual investors lack sufficient knowledge about the bond market which makes exploiting them as easy as ‘taking candy from a baby.'”
“The winning strategy in fixed-income markets, whether taxable or tax-exempt, is to choose the lowest-cost fund that meets your credit and maturity criteria.”
“Unfortunately, the longer the maturity, the higher the correlation of fixed-income assets to equities.”
“Limit the taking of credit risk to the short to intermediate term and to also limit the taking of credit risk to the highest investment grades.”
“As the credit rating decreases, the correlation with equity returns increases. This is a strong negative feature of lower-rated bonds.”
“The main purpose of fixed-income securities for most investors is to provide stability to their portfolio, allowing them to take equity risk.”
“The risks incurred when investing in preferred stocks make them inappropriate investments for individual investors.”
The Only Proven Road to Investment SuccessChandan Sengupta
The most unrealistic expectation people have about investing–especially investing in stocks–is that if they work hard and smart or can find the right advisor, they can improve their investment returns.”
“Your best bet is to keep investing regularly in a broadly-diversified index fund ignoring whether you or others think the market is too high or too low–.”
“You should switch all your investments in stocks to index funds as soon as possible, after giving proper consideration to any tax consequences.”
“There is overwhelming evidence that the simplest possible investment method works much better than all the other more complex ones.”
“Should you keep buying even if the market is going down? Absolutely. That is the best time to buy.”
“You should have no expectations about short-term and year-to-year returns on stocks.”
“In investing we are our own worst enemies.–our emotions get in the way.”
“Try to ignore the news as much as you can.–Acting on any of that information will almost certainly do more harm than good.”
“Stay away from the major full-service brokerage houses.”
“Over the years the Vanguard Group has stood head and shoulders above other fund companies in giving the interest of the investors the highest priority.”
“To succeed, you must follow your investment plan with discipline, year after year, decade after decade. The simpler your investment plan, the easier it will be to stay with it.”
The Probability of FortuneMosheMilevsky
“Given the enormous competition that exists in the marketplace, and given the sheer number of individual analysts and institutions that are searching for undervalued stocks, I am somewhat skeptical about anyone’s ability to consistently beat the market.”
“Correlation is the key and secret to diversification’s success.”
“Buying 10 stocks or 10 mutual funds can be just as risky as buying one stock or one fund, if they are all in the same general economic and financial sector.”
“It is extremely important that you not annuitize too early in your retirement years.”
“If you can’t handle the short term, if the uncertainty is stressful and the headlines are unbearable, then the markets are too hot for you: get out of the kitchen.”
Protecting Your Wealth in Good Times and BadRichard A. Ferri
“When we get down to the basics, we are our own worst enemy. We are prone to have warped perceptions of our ability that cause us to act irrationally.”
“The best strategy is to hold a diversified portfolio that contains all types of stocks and stick with a constant mix.”
“Let’s face it: most investment companies are in business to make money from you, not for you.”
“Investing in bonds may not be as glamorous or exciting as investing in the stock market, but their steady return serves as a stabilizer in a portfolio.”
“Young adults who think they are blessed with market smarts are lucky if they lose money early in life. That makes them humble and respectful of market forces.”
“Early savers need only two or three no-load mutual funds to fill an investment portfolio. Start with a total U.S. stock market index fund and add a total bond market index fund.”
“Ensure the investments you hold have a low correlation with each other.”
To be continued here.