Facebook will have an IPO soon. If you invest through mutual funds, will those mutual funds buy Facebook stock after the IPO? If so, when will they buy it? People ask this question because either they worry their mutual funds will buy into a bubble and pay a price too high or they worry their […]
How To Buy I Bonds On a Future Date in TreasuryDirect
It’s time to buy I Bonds! I waited until now because I wanted to earn a little more interest on the money in my checking account at Alliant Credit Union. I Bonds will still pay interest for the full month if you buy on any day during the month. Therefore if your own bank account […]
Experiment: Buying On A Dip
I said in a previous post in December that I would do a small experiment on my IRA contribution for 2012. See Lump Sum, Dollar Cost Average, Or Wait for Dip? Instead of contributing $5,000 at the first opportunity (January 3 this year because January 2 was a holiday), I would wait for a small […]
What Would Happen When Interest Rates Go Up
By now you probably heard that bonds, and in particular long-term US Treasury bonds, did the best in 2011 among all major asset classes. Here are the performances of select Vanguard mutual funds in 2011: Vanguard Long-Term Treasury Fund (VUSTX) +29.28% Vanguard Long-Term Bond Index Fund (VBLTX) +22.06% Vanguard Long-Term Investment-Grade Fund (VWESX) +17.18% Vanguard […]
What to Do When Interest Rate Is So Low
Princeton University professor emeritus Burton Malkiel and the author of the popular book A Random Walk Down Wall Street wrote in the Wall Street Journal The Bond Buyer’s Dilemma. Professor Malkiel suggested some reasonable alternatives to long-term U.S. Treasuries. “The first is to look for bonds with moderate credit risk where the spreads over U.S. […]
Lump Sum, Dollar Cost Average, Or Wait for Dip?
It’s December. A new year is just around the corner. I’m thinking of when I should contribute to my IRA for the next year. In the past, I always contributed the full amount at the first opportunity: January 2. Every year I just moved $5,000 or whatever the limit was for that year from my […]
Bonds Bubble vs Gold Bubble
PIMCO’s founder and star manager Bill Gross called the bonds bubble too soon. He got a lot of flak for getting out of Treasuries before Treasuries had a good run. Many people point to this as a case-in-point for the failure of active management. He had to issue a mea culpa saying he was wrong. […]
Market Timing: Transaction Costs and Taxes
I continue to look for criticisms of market timing and see how the market timing proponents would answer them. Last time I looked at some criticisms from Vanguard founder John Bogle. I think those criticisms were answered reasonably well. Another major area of criticisms centers around frequent trading, transaction costs and taxes. Critics say market […]
Why Buying On the Dips Is Still All It’s Cracked Up to Be
Wall Street Journal columnist Jason Zweig wrote a puzzling article Why Buying on the Dips Isn’t All It’s Cracked Up to Be. The gist of it is that buying on the dips doesn’t work. I find the article puzzling because it has a weird definition for buying on the dips. It defines a dip as […]
Market Timing: Criticisms From John Bogle
In the previous post Market Timing vs Conservative Portfolio I explored a possible valid reason for market timing. Proponents say that market timing isn’t so much for enhancing returns but for reducing risks. Although market timing underperforms the market, an investor with low risk tolerance would invest in a conservative portfolio anyway, which also underperforms […]
Market Timing vs Conservative Portfolio
After listening to Paul Merriman’s Sound Investing podcast, I found out that Paul Merriman does both indexing and market timing. He said of the $1.5 billion his company manages for clients, about 15% are invested in market timing strategies. That’s quite peculiar. Usually people who follow indexing believe in market efficiency, which says it’s unlikely […]
Save Aggressively, Invest Conservatively
Now we know the story that retail investors run for the hills whenever the stock market hits turbulence is largely a myth. Even during the serious financial crisis in 2008-2009, only 7% of the money invested in stock mutual funds were sold out of those mutual funds. However, even though most investors don’t sell, they […]