|
|
By Kevin M
Real estate has been the favorite whipping boy of the investment community for the past few years—heck, and most of the media too—but is it time to rethink that position? I’m not talking about the decision to buy a house as a primary residence—that’s a deeply personal decision based on your unique circumstances. No, I’m talking about real estate for investment.
A lot of people are nervous about real estate right now, and you can hardly blame them. Given the wild ride the housing market has been on for at least the past three years, this is hardly a time for unbridled optimism. Yet investing in real estate is probably a better bet than it’s been in decades.
Consider the following:
Continue reading Has the Time Come Again to Invest in Real Estate? →
Beyond Buy-and-Hold #13
By Rob Bennett
Everyone else has gone into the living room to watch television. You’re looking over at the cheesecake. One more slice? No! It would be wrong!
How about a teeny, tiny slice? A slice that small couldn’t hurt anything. I’m talking about a piece so small you can barely see it. I mean, come on.
Sound at all familiar?
We humans are self-deceivers. We’re hard working. We’re creative. We’re loving. Still, deep down inside there’s something weak and bad in us. We cheat. That’s the thing. It’s not only others that we cheat. We cheat ourselves. We do it all the time.
We say we’re going to get regular exercise and it doesn’t happen. Who loses out? We say we’re going to not put off doing the taxes this year and the vow turns out to be a lie. Who suffers the anxiety that comes with getting all those records together at the last minute? We promise we will never again say an unkind word to our loved ones. Yet the next time one says or does something that hits one of our emotional hot buttons, we mess up yet again.
Continue reading Calorie Counting for Stock Investors →
Beyond Buy-and-Hold #11
By Rob Bennett
You’re arranging a family reunion. Hundreds of people will be invited to the picnic event and many will need to travel long distances to ge there. There will be lots of good food, a magician is being hired to entertain the children and there will be a band playing music for the adults. Expenses will be considerable.
You’ve scheduled the event for February 15 in New York. One family member observes that the odds are strong that it is going to be too cold in February for a picnic, but you pooh-pooh these concerns. “No one can predict the weather with 100 percent accuracy,” you point out.
You add: “If I were to look in an almanac and schedule the picnic for a time when the weather is likely to be more suitable, that would be timing the picnic. I know better than to put us all at that sort of risk. I’m going to take the prudent bet here, ignore the historical record of weather patterns in New York and hope for the best. Making predictions about this sort of thing is far, far too dangerous.”
Huh?
Continue reading The Only Thing More Dangerous Than Market Timing Is Failing to Engage In It →
Beyond Buy-and-Hold #10
By Rob Bennett
I’ll tell you why in a moment.
But first things first. Investing is a money issue. When you can’t trust someone to tell you the truth about a money issue, you have a great practical need of a means of finding out how that person is steering you wrong. Before I do anything else, I am going to provide those of you who cannot trust me to tell you the truth about stock investing (that’s all of you!) links to four articles that may help a bit:
Continue reading You Cannot Trust Me to Tell You the Truth About Stock Investing →
Beyond Buy-and-Hold #9
By Rob Bennett
People are getting antsy. We were told that stocks always provide great returns in the long run. But stock investors have now experienced a Lost Decade. Each day more and more of us are asking: “When does the long run kick in?”
There are two answers to this question.
The first answer, the one that responds only to the question directly asked, is: “We have one more price crash to endure and that is likely to take place within the next five years. From that point forward, long-term returns are likely to be awesome.”
The second answer, the one that addresses the confusion at the root of the question and thus provides more genuinely helpful guidance is: “Stocks have been performing over the past 10 years precisely as anyone who was familiar with the historical return data would have expected them to perform. The strong likelihood is that they will continue to do so and that is not good news for those heavily invested in stocks today.”
Continue reading Stock Investing for the Long Run–But How Long is the Long Run? →
Beyond Buy-and-Hold #8
The How-To of Valuation-Informed Indexing
By Rob Bennett
Say that you agree that you need to take valuations into consideration when setting your stock allocation. How do you go about doing so?
The first thing that I do is to check out The Stock-Return Predictor, a calculator at my web site that performs a regression analysis of the historical stock-return data to reveal the most likely 10-year return on stocks purchased at any specified valuation level. Here’s a link:
http://www.passionsaving.com/stock-valuation.html
To get an idea of how the calculator works, try plugging in the P/E10 levels that applied at different times in recent history and seeing what the Return Predictor tells you about the likely 10-year return for stocks purchased at those times. In 1982, the P/E10 level was 8; the calculator tells you that the most likely 10-year return was an annualized 15 percent real. In contrast, the P/E10 level was 44 in 2000 and the most likely 10-year return was an annualized negative 1 percent real.
Continue reading Want to try a different way to invest in the Stock Market? →
Beyond Buy-and-Hold #7
By Rob Bennett
Say that there was a Guru who truly knew everything there is know about investing and that he was kind enough to start a blog and tell you the answers. And say that you were smart enough to appreciate how smart this fellow was and to read him every day. Would this make you an effective investor?
It would help. But by itself it would not make you an effective investor.
To explain why, I need to ask you another question.
When you see a television commercial in the “Got Milk?” series, does it make you buy more milk?
Most people say “no.” They point out that the phrase “Got Milk?” doesn’t contain any intellectual content. How could that phrase possibly persuade anyone to buy milk?
Well, it does.
Continue reading You Invest Poorly for the Same Reason You Spend Too Much →
Beyond Buy-and-Hold #6
By Rob Bennett
Last week we looked at Why the Experts Don’t Tell the Truth About Stock Investing. Let’s flip it! Set forth below are nine reasons for believing that the experts would like to shoot straight if only it didn’t mean saying the three hardest words to pronounce in the entire English language (“I” and “Was” and “Wrong”).
1) William Bernstein reported the safe withdrawal rate (SWR) accurately in his book The Four Pillars of Investing. I brag about being the first person to report the SWR accurately, but Bernstein actually beat my May 13, 2002, Motley Fool post by six weeks (I think my brag is a fair one, however, given that I have devoted eight years of my life to letting middle-class investors in on the secret while Bernstein has avoided publicizing the matter). On some level of consciousness I think he would like to see them get out or he wouldn’t have reported on them in his book.
2) Vanguard Founder John Bogle, Mr. Buy-and-Hold himself, has acknowledged that Valuation-Informed Indexing can work. He is not yet willing to put the knife in his Buy-and-Hold baby. But he’s thinking about it!
Continue reading Some Experts Are Starting to Tell the Truth About Stock Investing →
By Rob Bennett
 Valuation-Informed Indexing offers long-term investors both higher returns and less risk than what they can expect while following a Buy-and-Hold strategy. It sounds good, of course. The trouble is — It sounds too good.
Many investors are skeptical of Valuation-Informed Indexing on grounds that it sounds too good to be true. Higher returns and lower risk both? If there really were a way to pull that off, everyone would be doing it. No?
I think that’s right. Eventually, everyone will be doing it.
For now, though, you need to dig to learn what works in stock investing. Most of the people generally viewed as experts in this field very, very, very much do not want average investors to learn what works.
There are nine reasons:
Continue reading Why the Experts Don’t Tell the Truth About Stock Investing →
Beyond Buy-and-Hold #4: Long-Term Timing Is Not At All Similar to Short-Term Timing
By Rob Bennett
 Buy-and-Hold advocates often advise investors not to fall for market timing schemes. I am not too crazy about timing schemes myself. I avoid them. But I do believe strongly in long-term timing, the timing approach employed by Valuation-Informed Indexers. This timing approach is different. This timing approach is not a scheme.
I don’t have confidence in this approach because the data supports it or because I think that it may work or that it is likely to work. I have confidence in this approach because it must work. It is not possible for the rational human mind to imagine a circumstance in which this timing approach would not work. Could I state it any stronger?
Short-term timing — all the timing approaches properly referred to as “schemes” fall into this category — involve guesses as to which way stock prices are going. Even in cases in which they work, they are tricky. I believe that it might be possible for a small number of sophisticated investors to succeed at short-term timing (changing your stock allocation with the expectation of seeing a benefit within a year or so). But I do not think that short-term timing is at all a good idea for the typical middle-class investor. I see eye to eye with the Buy-and-Holders re this one.
Continue reading Is Timing the Stock Market Possible? →
|
OutOfYourRut Disclaimers
General: Any information in regard to money, credit, personal finance, or in regard to any other monetary topic, provided or shared on OutOfYourRut.com is presented for information and entertainment purposes only and does not constitute financial advice. It is intended to provide general information only and does not constitute personal financial advice in regard to your specific circumstances...MORE-->
|
