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 »
Lesson 21 – A More Sensible Use of Hedges
As I mentioned in the last lesson, the Permanent Portfolio (PP) is NOT an example of a well-diversified portfolio. It does, however, have, in my opinion, three excellent hedges: Treasury bills, Treasury bonds, and gold. Hedges, as insurance, are to protect you against losses you can’t afford to take. If you’re a long-term investor, a Read more »
Lesson 20 – Ruining a Good Idea: The Permanent Portfolio
I’m not the first person to identify Treasury bills, Treasury bonds, and gold as effective hedges against stock-market declines. In fact, there is a well-known strategy known as the Permanent Portfolio, developed by the late Harry Browne, which has recently been making a comeback. Browne first referred to the idea of a Permanent Portfolio in Read more »
Lesson 19 – Panic Insurance
The great investor, Warren Buffett, has said, “Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” Buffett’s Berkshire Hathaway holding company has endured such declines multiple times during its climb from $15 per share in 1965 when he took over the company to Read more »