Staff

20
Feb

Modern Portfolio Theory

Modern Portfolio Theory Before shifting into further discussion about whether these historical numbers provide the most appropriate assumptions for future market performance, it is worth understanding how to choose an asset allocation and put together an investment portfolio while assuming that these historical numbers are the right ones to use. The more basic point is that any assumptions… The post

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18
Feb

Historical Market Returns – Part Two

Historical Market Returns – Part Two This article is part of a series; click here to read Part One. Moving to bonds, Morningstar data shows that since 1926, the average return from intermediate-term government bonds was 5.2 percent with a standard deviation of 5.6 percent. With the lower volatility, the compounded return is only slightly less at 5.1 percent. For

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12
Feb

Historical Market Returns – Part One

Historical Market Returns – Part One The primary subject of my book is comparing the risk premium with risk pooling as a source of funding for retirement goals. An important step is to first make clear what the risk premium is and how it relates to an investment portfolio. Fundamentally, investors prefer certainty to uncertainty. A bond provides a known

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10
Feb

Overview of Stocks and the Stock Market

Overview of Stocks and the Stock Market Stocks provide an ownership stake in a company. They provide access to company earnings based on its future performance. Companies can pay dividends to their stockholders to return profits to the owners, or they could reinvest profits into the firm to lay the foundation for better performance and even larger dividends to owners

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6
Feb

Laddering With Individual Bonds – Part Three

Laddering With Individual Bonds – Part Three This article is part of a series; click here to view Part 1. Exhibit 1.1 provides reasonable approximations for sustainable spending in retirement as it relates to a bond interest rate (or a fixed return for an investment portfolio) and a retirement longevity assumption. For a sixty-five-year-old with $1 million, the exhibit shows

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3
Feb

Join Our Special “Love Insurance” Twitter Chat during #InsureYourLove

Join Our Special “Love Insurance” Twitter Chat during #InsureYourLove Join us as we moderate a Twitter Chat during Insure Your Love Month along with NAIFA. We’ll discuss new data that shows Americans are delaying traditional life milestones and following alternative paths in favor of financial security. We hope the chat helps promote how important financial security, including having adequate life

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31
Jan

Laddering With Individual Bonds – Part Two

Laddering With Individual Bonds – Part Two This article is part of a series; click here to read Part One. I would argue that it is much easier for a retiree to ignore unrealized capital losses on an individual bond than for a professional trader or retiree needing to sell bond shares to meet expenses because the individual bond is

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26
Jan

Bond Pricing 101

Bond Pricing 101 As a bond provides a contractual right to a series of future payments received at specified points of time, the price for a bond is simply the present discounted value of the future cash flows. The face value of a bond will be repaid at maturity. A zero-coupon bond provides only a bond’s face value,… The post

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23
Jan

Laddering with Individual Bonds

Laddering with Individual Bonds Duration matching is not straightforward for bond funds when shares of the bond fund must be sold to meet ongoing retirement expenses. If rates have risen, shares of the bond fund may need to be sold at a loss, with more shares sold to meet a given spending objective. This triggers sequence risk and locks… The

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17
Jan

The Yield Curve and Break-Even Inflation

The Yield Curve and Break-Even Inflation Understanding the relationship between bond risk and time to maturity and duration of a bond provides the basis for understanding the bond yield curve. The yield curve shows the yields to maturity for a series of bonds—typically US Treasury bonds—with the same credit quality but different maturity dates, along with the term structure for

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