Focus On What You Can Control

A big mistake every investor makes is trying to control things that are uncontrollable. They try to figure out where the market is going. They try to predict the economy. They try to find the best basket of funds that gives the best returns possible. They try to find the perfect stock.

When you spend all your time trying to optimize for the perfect outcome, and the results you want don’t materialize, you’re back at square one. Then you start the process all over. Investing isn’t about perfection because every year offers up a new best way to invest. There’s one problem. You don’t find out until after the year ends. Continue Reading…

Happy Hour: Local Resource…Online

Back at the beginning of the year I finally took the time to get a library card. As a Chicago resident, it was easier than I expected. I did it all online, at home, in about five minutes. Half of that time was checking out how the online service worked. Since then, I’ve spent a few random hours just digging through the library.

The online library gives me access to a huge resource that I previously wrote off. That means all the books, magazines, journals, and newspapers I’d get at the library, but also at home too, plus back issues. There’s also access to premium subscriptions that I wouldn’t normally pay for or don’t have to pay for anymore like Morningstar, the Wall Street Journal, and the New York Times. Continue Reading…

Running Fire Drills On Your Portfolio

Best PlanRemember back to when you were in school. Mixed within the classes, lunch, and recess were regularly scheduled safety drills. There were fire drills, tornado drills, and for the Cold War kids, nuclear bomb drills (duck and cover).

I faintly remember the fire drills in grade school. The teachers emphasized walking in a calm, quiet, and orderly fashion, single file out of the classroom, down the stairs, and out the door. Each class had its own predetermined path that finished somewhere outside at a reasonably safe distance from the school. Continue Reading…

Happy Hour: Worst Real Estate Investment

The idea of being a landlord doesn’t appeal to me. That’s not to say real estate can’t be a good investment. It can. Like every other type of investing, it takes time to learn which investments work – be it a multi-unit building, condos, commercial property, land, or stocks, bonds, funds, etc. – so you actually make a decent profit over time.

I bring this up because a recent Gallop poll came out showing real estate, of all things, is seen as the best long term investment…again. I guess it’s easier to get over a housing market crash than a stock market crash. Continue Reading…

The Benefit of International Diversification

Keynes QuoteWhat happens if you only invest in the U.S. stock market and it goes no where over a longer period of time, say a lost decade? Your stock allocation, built to grow your money, just failed. Something needs to pick up the slack. And there’s no guarantee your bond allocation will come through.

Enter international stocks.

At first sight, it may not seem like it matters when you compare the long term returns of U.S. stocks (S&P 500), international stocks (MSCI EAFE), and a 50/50 split since 1970. As the table below shows, having a portion of your stock allocation diversified internationally doesn’t improve your returns, but you don’t really lose much either. Continue Reading…