Blogs & Comment

Quotable guide to passive investing (XII)

Here is Part XII of the Quotable Guide to Passive Investing. Part I is here. To scroll through Parts II to XI, click on links at the bottom of each page.
Unconventional SuccessDavid F. Swensen
Without a rock-solid belief in the fundamental principles that undergird an intelligently crafted portfolio, weak-kneed investors face the likelihood of a disastrous whipsaw.”
“Roger Ibbotson’s 78 years of data show stocks earning 10.4% per annum. No other asset class possesses such an impressive record of long-term performance.”
“TIPS constitute a compeling addition to the tool-set available to investors.”
“Sensible investors avoid speculating on currencies.”
“A modest allocation to emerging markets stocks contains the potential to enhance the risk and return characteristics of most investment portfolios.”
“As the preeminent practitioner of indexing for individual investors, Vanguard stands atop the industry in terms of excellence in tracking a wide variety of markets.”
“With its inflation-sensitive nature, real estate provides powerful diversification to investor portfolios.”
“Sensible investors avoid non-core asset classes.”
Wealth of Experience: Real Investors on What Works and What Doesn’tAndrew S. Clarke, and Jack Brennan
“After you’ve been investing for a while, the whole thing seems simple.”
“If you earn $100,000 a year, and interest rates are 5%, you’ve got the equivalent of a $2 million bond in your company.”
“Very few investors who hold only stocks have the fortitude to ride out a severe, prolonged market downturn.”
“Systematize the habits and practices that can keep emotions at bay: dollar-cost averaging, rebalancing, simplifying, and indexing.”
“The probability of loss is about 50% over a time horizon of 1 day. About 30% over a year. Less than 1% over ten-years.
“Successful investors have the patience to wait out market fluctuations.”
“Simplifying and indexing reduce the number of decisions you have to make. The fewer decisions you make, the fewer opportunities emotion has to wreck your plan.”
“Setting a goal, developing an appropriate asset allocation, and selecting a handful of funds are not hugely complex tasks. The hard part comes next: battling your emotions so that you can stick with your plan through thick and thin.”
We’re Not in Kansas AnymoreWalter Updegrave
“Professor Terrance Odean studied he results for 60,000 households with discount brokerage accounts. He found that investors who traded the most earned annualized net returns 35% lower than the average for the households overall. In other words, less is more.”
“In the euphoria of a bull market investors think they’re much bigger risk takers than they really are.”
“I would be reluctant to put all my money in stocks–or, for that matter, any single asset class–no matter what my age.”
“For most Americans, their home is still their single largest asset.
“We tend to underestimate just how long our retirement portfolio is going to have to support us.”
“I can’t imagine a scenario where it would make sense to annuitize all your assets.”
“Choosing an annuity: Get quotes from several insurers; opt for low fees; stick to high quality companies–and diversify; don’t annuitize all your money at once.”
“Develop a tax-smart withdrawal strategy: Start by drawing from your taxable accounts; move on to tax-deferred retirement accounts; save money in any Roth IRA accounts for last.”
To be continued here.