S&P 500 After Multiple Losing Years

We don't have to be smarter than the rest. We have to be more disciplined than the rest.The S&P 500 doesn’t lose often. It’s only seen 24 losing years from 1926 to 2014. Roughly one out of every four years ends in a loss. Too bad that doesn’t happen like clockwork.

The S&P has gone on a nine year stretch without a loss and its had periods of multiple losses in a row. In fact, half of the losses were involved in multi-year losing streaks.

The infrequency of losing years doesn’t make it easy on investors. It allows you to get comfortable, too comfortable sometimes, or comfortable enough to forget about what the last loss did to your psyche and your savings. Continue Reading…

Picking the Worst Performing Countries

Picking Worst PerformanceWhy would anyone choose the worst performing countries? We know that chasing the countries with the best returns doesn’t pay off.

Mean reversion is tough on investors who ignore their plan and chase returns.

We make it harder on ourselves by investing with a wandering eye. Markets revert because investors act irrationally, ditch their plans at the worst possible times, and chase performance. These investor mistakes are a big argument for a simple buy and hold strategy which works well over time.

What if you tried a different approach? A contrarian might look at the biggest losers. Continue Reading…

Chasing the Best Performing Countries

Chasing Single Country ReturnsA broad index fund is one way to get international exposure in your portfolio, but index funds aren’t perfect. One alternative is to pick single country funds but how do you choose which countries to own?

The problem with picking any fund is our reliance on recent performance. This is a common mistake investors make – chasing returns. Without a plan, the best performing funds are the first ones picked every time.

The investing world we live in tempts us with one, three, and five-year returns on every stock and bond fund around. We love to own what’s going up, we hate to miss out, so we chase returns of the best performing funds of the recent past. Sometimes it works, but not always. Continue Reading…

The Argument For International Stocks

International Stocks Annual Returns BreakdownInternational stocks are a great way to diversify away from the U.S. But when a home country bias is alive and well, it’s easy to ignore everything else. U.S. stocks have performed admirably in the past, but international stocks have too.

Since 1970, the S&P 500 performed at a 10.40% annual clip (with dividends). Did you know that during that same time, international stocks practically matched it?

You can try to hand-pick countries based on expected returns or go with a basket of countries that captures all that missed opportunity. The tables below show how international stock returns breakdown. Hopefully, it makes the argument to stop ignoring the big opportunity outside the U.S. Continue Reading…

Look Beyond Dividends To Shareholder Yield

Shareholder YieldDividends are the easiest way to return money to shareholders. This draw a big enough following that there’s a label for it – dividend investing. For investors who proudly wear that label, I’d argue you should look for companies with a different type of yield appropriately called shareholder yield.

For me, a dividend is a nice addition to a great investment not a prerequisite. If you’re searching for great companies, there’s a good chance you’ll find one that pays a dividend now or down the road, because good companies deal with the same question eventually.

What To Do With All That Cash?

Just like people, some companies are better at managing money than others. Those that do it best use the five tools below to efficiently increase shareholder value: Continue Reading…

Index Fund Vs ETF: Does It Matter?

Index Fund vs ETF BattleGiven the choice between two funds – an index fund vs ETF – that meet the same goal, costs are a big deciding factor. The same principle works for the active vs index argument too. Why pay more for something when you get the same results for less somewhere else.

I think we can agree low costs matter. Once you decide on an all index portfolio, the next step is picking between similar index funds and ETFs. Both do the same thing, for the most part. So is one better than the other? Are there other factors to consider?

Index Fund vs ETFs Cost Debate

There are a number of ways to build a portfolio. For this exercise let’s use a sampling of asset classes to build two portfolios around – one with index funds and the other with ETFs. Continue Reading…