Once you’ve decided to obtain term life-insurance coverage to protect those dependent on you, you need to determine the amount of coverage needed. There are plenty of calculators online, but my quick-and-dirty approach is as follows: Determine the expected annual spending of those you’ll be leaving behind. A detailed analysis would be nice, but you Read more »
Lesson 24 – Life Insurance
We’ll begin our disaster-of-the-week sessions with the most straightforward: life insurance. A few principles will guide us: The purpose of insurance is to protect against financial losses you cannot afford to suffer. Insurance policies generally make lousy investments. This is as it should be, since we want the insurer to be financially healthy and able Read more »
Lesson 23 – Financial Planning Is More than Just Investing
Now that I’ve answered a few questions from readers, all on the details of investing, I want to remind you all that there is more to financial planning than investing. We could talk for the rest of our lives about ways to tweak a portfolio and possibly add a little more in returns, but if Read more »
An All-TIPS Retirement Savings Portfolio?
Question: I’m curious how you might evaluate the thinking of Zvi Bodie, who notes, in this link, that 100% of the money he is setting aside for retirement is held in treasury-inflation-protected securities, and that all of one’s income needs for retirement be comprised essentially of social security plus TIPS in an IRA account. The Read more »
Is 295 Stocks Enough Diversification?
Question: ACWV has only 295 holdings. How can this be a truly global, highly diversified fund? Thanks. Answer: I like the way you think. The greatest danger in equity investing is inadequate diversification, and I’d much rather someone be overdiversified than underdiversified. I’m also not going to fight to the death on this one, since Read more »
What about Dividend-Growth Investing?
Question: May I ask what your opinion is re “dividend growth investing”? The angle that attracts me is that if one could get by on the dividends alone (in addition to Social Security, pension, etc.), you would not be forced to sell assets to live on during a down market. As such that would constitute Read more »
What Is a Good Diversification Strategy for Bonds?
Question: Andrew Tobias said to “Ask Less” the money questions. OK, here’s mine. Is the following a good diversification strategy for bond holdings: 50% total bond index, 50% intermediate bond index? Many bond funds mirror the Barclays U.S. Aggregate Bond index. However, supposedly around 75 percent of the index tracks government securities or other types Read more »
Are Commodity Futures a Good Hedge?
Question: I’ve been holding PCRDX since 2006 in a tax-sheltered account. How have I done? What are your current thoughts on commodities? Answer: PCRDX is the PIMCO Commodity Real Return Strategy Fund, which uses Treasury Inflation Protected Securities (TIPS) as collateral for a 100% long investment in a basket of commodity futures. Depending on when Read more »
How Much Better Is Alternative Weighting of Stock Indexes?
Question: Can you review the research on market weighting vs. equal weighting vs. fundamental weighting? What might be the long-term advantage in return for one method vs. another (or, to put it another way, how much can I expect to lose if I chose the wrong method)? Answer: My primary reason for preferring the use Read more »
Lesson 22 – Does the Doctor Take His Own Medicine?
I am sometimes asked if I invest my own money the same way I invest client money. I’m afraid such questions usually elicit a sarcastic response such as: “Do you think a surgeon should undergo the same operations she performs?” Or “Why would I even invest for one client the same way as another, let Read more »