Blogs & Comment

What to buy for your portfolio

When people add investments to their portfolios, many tend to focuson the expected return of the investment. It’s also useful toconsider how the new investment fits in with the rest of the portfolio i.e. impact onoverall risk, return, volatility and other aspects.
As RRSP season rolls on and people mull over where to invest their contributions, here are some things other than expected returns to consider when adding to portfolios — as conveyed by some of the best investing minds of our era:
Larry Swedroe and Jared Kizer, The Only Guide to Alternative Investments
When considering an asset class for inclusion in a portfolio, investors need to consider the diversification benefit of the investment.
Moshe Milevsky, The Probability of Fortune
Correlation is the key and secret to diversifications 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.
Ben Stein andPhil DeMuth, Yes, You Can Supercharge Your Portfolio
The goal of portfolio planning is to use diversification to secure the maximum expected returns for the minimum expected risk in meeting portfolio objectives.
Burton G. Malkiel, The Random Walk Guide to Investing
Many studies have concluded that the major determinant (90%) of the overall rate of return earned by investors is not the particular bond or stock funds they buy, but rather the way they allocate their investment funds among the various asset classes.
Taylor Larimore et al., The Bogleheads Guide to Investing
The most important factor when diversifying is to adhere to your asset allocation strategy.
Ron Ross, The Unbeatable Market
Extensive studies by Davis, Brown & Groetzmann, Ibbotson and Groetzman, and Elton et al. all confirmed there is no significant persistance in mutual fund performance.
Jerry Tweddell and Jack Pierce, Winning With Index Mutual Funds
Most academic studies have shown that investing in funds whose style or sector concentration is out-of-fashion is more profitable than those that are in vogue.
John Bogle, Common Sense on Mutual Funds
The key to fund selection is to focus, not on future return which the investor cannot control but on risk, cost, and time which the investor can control.
Christopher Jones, The Intelligent Portfolio
Evaluate diversification at the household level, not at the individual account level If you own a home already, you probably have enough real estate in your household portfolio.
JohnBogle, The Little Book of Common Sense Investing
A mutual fund portfolio continuously adjusted to hold only Morningstars five-star funds earned an annual return of just 6.9% between 1994 and 2004, nearly 40 percent below the 11.0% return of the Total Stock Market Index.
Jason Zweig, The Little Book of Safe Money
You should never act on an investing idea the same day you get it.
Larry E. Swedroe and Joseph H. Hempen, The Only Guide to a Winning Bond Strategy
Unfortunately, the longer the maturity, the higher the correlation of fixed-income assets to equities . As the credit rating decreases, the correlation with equity returns increases. This is a strong negative feature of lower-rated bonds.
Burton G. Malkiel, The Random Walk Guide to Investing
The correct response to a fall in the price of one asset class is not to panic and sell out. Rather, you need the discipline and the fortitude to buy more.
Walter Updegrave, Were Not in Kansas Anymore
In the euphoria of a bull market investors think theyre much bigger risk takers than they really are.
Jason Zweig, The Little Book of Safe Money
Men should make a special point of having their wives review any choices the husbands regard as a sure thing . It is irresponsible for a husband to keep such tight control of the familys investments that his wife will find them completely unfamiliar after he is gone.