Billionaire investor and businessman Warren Buffett has built an enviable investment record through his management of Berkshire Hathaway Inc. From 1965, when he took over the publicly traded company, through late September the stock grew from $18 a share to $75,700, an increase of 4,204%. That is equivalent to an annualized growth rate of almost 25% per year, well in […]
Client Letter – Q3 2003
Once again, we’ve had a great quarter! I have included a Monthly Performance Report from DFA, which shows the quarterly performance for all of the DFA funds. I have placed stars next to the primary DFA funds that I use in my average size portfolios. If you take a moment to review the quarterly performance of these funds, you will […]
An alternative: Small international stocks
Investment allocation theory teaches that a portfolio’s return and risk can be improved by adding more investments with low correlation to other portfolio investments. Investors who have suffered through the risks offered by the U.S. stock market in recent years apparently agree: There has been a large increase in interest in “alternative” investments, such as hedge funds, venture capital and […]
Inconsistent funds: Mutuals change their stripes
Investors who think they know what they are getting when they buy actively managed mutual funds had better look beyond each fund’s name, a new study indicates. Many stock funds use the terms “value” and “growth”in their names, indicating their particular investment leanings. However, over the last five years as the bear market changed the investment landscape, the differences between […]
A sucker’s bet hurts many investors
Mutual funds may be the most efficient and easy way for individuals to participate in the stock market, yet the average fund investor has not made anything like the market’s returns since 1984. What’s going on here? There are two problems, both related to average investor behavior: one is the urge to pay someone to beat the market; the other […]
Investment tax relief does not end tax planning
Congress has passed a massive tax cut package that gives special relief to investors. Lower capital gains tax rates and an exclusion for stock dividends eases the tax burden on those who realize investment gains in taxable accounts. However, investors still have to manage the tax impact of their investments correctly in order to maximize their gains. Under the new […]
Buy and hold is not dead, instead, it is ahead
Stock traders and brokerage houses looking for trading commissions love to deride “buy and hold” investment strategies. They use market downturns like the recent bear market to “prove” their points: that smart investors could have sold out of growth stocks in 1999 or 2000 and avoided the subsequent carnage, while getting back in early this year in time for the […]
Client Letter – Q2 2003
Since last quarter, most equity asset classes have experienced huge rebounds! Finally, your patience has been rewarded! Reuters reported that the S&P 500 had its “best quarter since 1998”—even though its quarterly return (about 15%) was less than that of many other equity asset classes. For example, some of the top performing asset class funds in my portfolios included the […]
Low expenses are a key to mutual fund success
It costs money to run a mutual fund and investors should gravitate toward funds that cost less than average to operate. Mutual funds as a class of investments are excellent low-cost instruments for most investors. But their low-cost average obscures those funds whose operating costs are significantly higher than average. Operational costs detract from a fund’s net return. A fund […]
Go worldwide for best diversification
The average American investor seems to have myopia about investing outside of the United States. That is a shame because diversification is the key to a successful portfolio, and foreign stocks and bonds offer tremendous diversification benefits. Back in 2000—the last full year where more stock mutual fund shares were purchased than sold—domestic stock funds had net inflows of over […]
