Your portfolio allocation

by Rhett

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

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Overemphasis on quarterly earnings?

by WCE

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?

Calculator here:
S&P 500 Return Calculator, with Dividend Reinvestment

Stock market shenanigans?

by MBT

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?

Retirement savings

by Grasshopper

Do you think 401(k) plans and IRAs will work as retirement savings for most Americans?
Are most of your friends and relatives saving enough for retirement in 401(k) plans and IRAs?
What have been your best 401k investments?
Do you think Teresa Ghilarducci and Hamilton James’s plan as described in the linked article would work?

A Smarter Plan to Make Retirement Savings Last – The New York Times

The current system — a mix of 401(k)s and individual retirement accounts (I.R.A.s) — is broken. These plans are individually directed, voluntary and leaky. Just over half of workers don’t have access to a workplace retirement plan. According to the National Institute on Retirement Security, Americans between the ages of 40 and 55 have retirement savings of $14,500, when they will need between 20 and 30 times that amount. Many people take money out before they retire. And the wealthy tend to pay lower fees and get higher subsidies for their savings.

Retirement planning

by Finn

We’ve had discussions here before about what we plan to do (or in some cases, actually do) in retirement (most of us would sleep more), and Rocky recently conducted a survey on how much money we need to be comfortable in retirement, and how much we expect to have.

But we haven’t had much discussion here of how we plan to get there financially.

What vehicles do you use to accumulate assets to support your retirement? 401k? IRA? Roth, or regular? Mutual funds? ETFs? Rental real estate? Medical Savings Accounts? Deferred annuities?

As we approach year end, and then tax season, this may be higher on our minds than during the rest of the year.

Basic Investment Rules

by Grace aka costofcollege

Do you think your investment portfolio is diversified?  Morgan Housel at the Motley Fool believes there’s only one way to tell if you’re truly diversified.

You are only diversified if some of your investments are performing worse than others.

Losing money on even a portion of your portfolio is hard for some people to swallow, so they gravitate toward what is performing well at the moment, often at their own expense.

In other words, some people gravitate toward selling low and buying high.

That was one of 16 Rules for Investors to Live By recently published by the WSJ.

Do you agree with these rules?  Which ones seem particularly important to you?  What rules would you add?  Have you been happy with your investment portfolio?

ADDED:  If you’re having trouble seeing the WSJ article, try clicking this link to Google and then select the first result.