Caught your attention, didn’t I? Please don’t be offended by the title of this post, and please don’t snigger over it. This is serious business, after all. Also called “Financial Pornography,” investment pornography consists of (1) alluring magazine cover headlines promising juicy riches, (2) articles featuring exciting ways to capitalize on supposed opportunities and (3) outlandish claims and predictions that may, in fact, be bad for your financial health. Finally, it has no redeeming value whatsoever (except that it is good for a laugh). When I go to conferences held by Dimensional Fund Advisors, one of the best run and most respected mutual fund companies, the lecture known affectionately as “Investment Pornography” generally gets the most attention and the most nodding heads of recognition. The presentation consists of articles from popular finance magazines followed by a quick analysis of what actually happened. Punchline: They were spectacularly wrong, time and time again.[...]

I ended my last blog by referencing an interesting study that demonstrated we humans tend to err on the side of optimism in our lives. Generally, a positive outlook is good for you. It’s probably helped many parents raise their teenaged children to adulthood, for example, without changing the locks on them even once. But when it comes to expected returns on your investments, it’s best to be as realistic as possible.[...]

You might be surprised at how fast the stock market can change … for the better. Let’s look at how the market has recovered remarkably – and quickly – from some notable downturns.

2008-2009.

“Do as I say, not as I do.” We’ve all heard the expression. We usually hear it when someone who is supposed to know better is doing something that they don’t what us to do. Parents are especially guilty of saying it. Politicians may not actually verbalize it, but might be the worst offenders. The same rings true for many investment advisors and mutual fund managers. And that could cost you money.[...]

Yesterday while at a doctor’s appointment, at around 3:30 pm, my cell phone dinged letting me know there was “Breaking News.” After reading that the Fed had raised the DISCOUNT rate, I immediately called the office to confirm the story, finding myself surprised, puzzled, and in a bit of disbelief. Post doctor’s appointment, all good, and back at the office, I was able to confirm that the Fed had raised the DISCOUNT rate to .75, or in Wall Street lingo 75 basis points (A basis point equals one tenth of a percent).[...]

“Individual investors tend to invest in a small number [of stocks] and they don’t know how to construct a portfolio. Professional portfolio managers control risk.” Jim Peterson, vice president at the Schwab Center for Financial Research.
My last post discussed the basic stock-bond allocation decision. This is a technique that many investment advisers use, but it [...]