Investments

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 […]

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 […]

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 […]

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 […]

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 […]