Investments

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 […]

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 […]

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 […]

Asset allocation has become a popular buzzword, often used by investors but not fully understood. Why would anyone bother trying to build a portfolio that includes a wide variety of different financial assets? The answer is easy: a well-diversified portfolio will deliver a higher long-term return at a lower risk level than any of its components. This result can be obtained […]

Investors ignored bonds during the late 1990s when interest rates were much higher than they are today. Now, with rates at historic lows, investors are flocking to bonds. Go figure. The reasons for the flight to bonds, evidenced by record inflows into bond mutual funds last year, are obvious: A grinding bear market for stocks has left investors looking for […]

Out of sight, out of mind: At least that seems to be the case when it comes to mutual fund investors and their costs of investing. Mutual fund buyers seem to have become very educated about visible sales commissions in recent years. However, they still don’t seem to pay attention to high, but hidden, operating expenses, a trio of finance […]

The mutual fund industry has an open secret: each year it buries hundreds of funds that couldn’t make it. Some of these funds were small unknowns while others were yesterday’s popularity club winners, unable to repeat their success in changing markets. Remember Munder funds and Amerindo funds, two big technology and Internet stock investors of the late 1990s? Well, only […]

A large body of academic investment research indicates that technical stock market analysis has about as much credibility as astrology.  Technical analysts use graphs and charts of prices and trading volume to make predictions about individual stocks, industry sectors, and the stock market itself. Although technical analysis is still widely practiced on Wall Street, academic research says the method rests […]

Many professional investors and academic researchers have long believed that little is better when it comes to stock size. Research has shown that the smallest stocks tend to beat their larger brethren on a long-term basis. Although the reason for higher small stock returns has not been definitively established, some researchers believe higher returns are compensation for the extra risk […]

Conventional wisdom pegs October as the worst month of the year for the stock market. It was in that month that the crashes of 1929 and 1987 occurred. But that wisdom is wrong: September has proved to be the worst month of the year, with the worst record over the past 50 years. The Standard & Poor’s 500 Index has […]