Bond Investing… I’m not there yet but eventually I’ll need to move into fixed income*. What do I need to know? What books should I read? I was reading that bond index funds don’t work nearly as well as stock index funds. Is that true?
* or do I?
What are your investments: index funds, bonds, individual stocks, timber land, oil and gas leases, gold, diamonds, farm land, etc?
What percentage of your net worth do they represent?
The Danger In Index Funds
This article discusses emphasis on quarterly, rather than long-term, earnings. This is one of the biggest changes at my employer in my career. Managers used to be focused on technical aspects of projects and developing people, and now they spend a lot of time managing quarterly finances. (Cash flow is not an issue at the company.)
How to Stop Short-Term Thinking at America’s Companies
My favorite fact was one I’ve tried to find unsuccessfully in the past: 8% of stocks were held by institutional shareholders in 1950 compared to 70% of stocks today. I don’t know how 401(k) accounts are considered in that allocation, but pension funds will definitely have their returns affected by any increase in corporate taxes.
Despite the emphasis on profitability, the S&P including reinvested dividends has had historically moderate growth for the past couple decades. Since I opened a 401(k) in ~December 1998, the S&P (with dividends reinvested) has increased by 3.0% annually after inflation. Is there any agreement on the long-term expectation and whether this is expected to be typical? I’ve long been skeptical of the graphs by financial planners, but I’m 20 years into my career and I’m even more skeptical. Or am I missing something?
S&P 500 Return Calculator, with Dividend Reinvestment
I read the book Flash Boys and found myself so appalled at how sketchy and underhanded the market is, and how little I know of how it works, that a handful of other people in my life got the book because I kept talking about it. The SEC has approved a new stock exchange run by the men who were central to the book.
IEX Group, Critical of Wall St., Gains Approval for Stock Exchange
Many of you know much more about the markets than I do. Do you see this as a good thing? Something that will last? Are the warnings that it could hurt small investors accurate?