Looking at Your Portfolio Can Hurt Your Returns

Earlier this week, we examined a pair of studies that sought to explore the relationship between the equity premium puzzle and investor behavior, specifically a behavior known as myopic loss aversion (MLA). MLA describes the tendency of investors who are loss-averse to evaluate their portfolios too frequently, thus causing them to take a short-term view of investing. […]

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Topics: Advice, Investment Strategy, Investor Behavior

How to Make the Most of Working with a Financial Advisor

As someone who has long made a living as a financial advisor, I have an inherent bias toward retaining one. I even have one myself, because I believe personal finance is more personal than it is finance. However, paradoxically, I fear that the vast majority of those who retain the services of a financial advisor […]

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Topics: Advice, Investing, Investment Strategy

You Have $10 Million and 10 Years to Live. What Would You Do?

Align your financial reality with your drivers of happiness. Manisha Thakor on a simple exercise to help you start creating tighter linkages between your money and your life so that the former serves the latter, not the reverse. Find it on WSJ.com By clicking on any of the links, you acknowledge that they are solely […]

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Topics: Advice

The Differences Between the Equity and Fixed Income Markets

The bond market is less transparent in pricing and trades less frequently than equity markets. Blerina Hysi explains how a trusted advisor can help navigate these market inefficiencies and prevent you from suffering excessive mark-ups.   By clicking on any of the links, you acknowledge that they are solely for your convenience, and do not […]

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Topics: Advice, Investment Strategy

Virtues of Do It Yourself Bond Laddering

Bond ladders are frequently criticized in the financial media and even among some professional advisors (who, I would point out, are often able to use only bond mutual funds or ETFs). Earlier this week, we corrected some common misperceptions regarding individually tailored laddered municipal bond portfolios. Today we’ll move on to the many advantages of owning […]

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Topics: Advice, Investing

Four Myths About Investing in Presidential Election Years

Earlier this month, we celebrated the declaration of our country’s independence. This is also the month that both our major political parties will hold their national conventions, perhaps making this the perfect time to examine what we, as a nation, do to ourselves financially every four years as we exercise the electoral system our forefathers […]

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Topics: Advice, Investing

Retirement Is Scary. Plan it Out

Retirement creates many challenges. Unfortunately, while about 10,000 Americans retire daily, the sad truth is that most people seem to spend less time planning for retirement than they do for a vacation. Anxiety regarding our futures is a common ailment, especially among the millions of Americans rapidly approaching the end of their working years. And […]

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Topics: Advice, Retirement

The Influence of Recent Market Returns on the Risk Tolerance of Individual Investors (Part 2)

Last week, we examined a study that found investors’ risk tolerance fluctuates positively with recent market returns. This behavior is in direct conflict with rational economic theory, which dictates that when market returns become negative, wealth contracts and risk aversion should therefore decrease (while risk tolerance should increase). Instead, the authors found that investment losses, […]

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Topics: Advice, Investing, Investment Strategy

The Influence of Recent Market Returns on the Risk Tolerance of Individual Investors

The recency effect—that the most recent observations have the largest impact on an individual’s memory and, consequently, on perception—is a well-documented cognitive bias. This bias could impact investment behavior if individuals focus only on the most recent returns and project them into the future. Such behavior may lead investors to experience a reduction in their […]

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Topics: Advice, Investing, Investment Strategy