Bogleheads.org

As the Financial Times recently reported, Neptune Investment Management, a UK investment firm, has decided to publish the "active share" of each of its funds. That is, how much each fund's holdings overlap with those of the appropriate benchmark index. This, they say, will prove that they ...

See if this helps clarify your thinking about risk: http://simplesmartinvesting.com/?p=294

From today's "Financial TImes": "Fewer fund managers are beating the market this year than at any time in over a decade." Among managers of large-cap US equity funds "Only 17.7 per cent are beating the Russell 1000 index" according to data compiled by Bank of America. &...

Five years and counting, this bull market is getting long in the tooth, with some of the classic danger signals flashing. If you're overweight stocks, rebalance.

See http://simplesmartinvesting.com/?p=395

Investors should focus on real returns, not nominal returns. Historically, the worse five- and ten-year periods for US stocks and bonds have been about equally bad, when computed in terms of real returns. But real bond returns have been negative far more often than have stock returns. And while US s...

I don't really think you need any allocation to bonds at your age if you are saving for retirement. A reasonable amount of cash or cash equivalents for emergency funding, otherwise equities--unless you plan to retire at a very young age. If you hold bonds because you don't believe you can stand stoc...

Unless you have the time, interest, knowledge and expertise to manage your own portfolio (which very few people have), I would strongly recommend that you consider outsourcing the management of your savings to an independent investment adviser, just as you would your accounting to an accountant, or ...

Investors have poured hundreds of billions of dollars into corporate bonds in the past five years. Corporations have met this demand by issuing bonds at a rapid clip: the corporate bond market is 42% bigger than before Lehman Brothers' collapse. Meanwhile, major investment banks have dramatically sc...

Active and passive investing are typically characterized as opposites. This oversimplification is misleading, as discussed here: http://simplesmartinvesting.com/?p=306

A response to a recent post of mine about TIPS accused me of the ultimate boglehead heresy: failure to “stay the course!” In fact, I’m a passionate advocate of staying the course, but this comment made me wonder whether the meaning of that phrase might be subject to differing interpretations. So I t...

Since your alternative to building your own stock portfolio is a mutual fund or ETF, you should keep score by maintaining a paper portfolio of, say, the Vanguard S&P 500 index fund as a benchmark. But only if your stocks are selected from that opportunity set; if you invest mainly in small-cap s...

In a posting last January, I warned against investing in TIPS at a time when real yields were negative.

Now they have swung into positive territory here's an update on TIPS http://simplesmartinvesting.com/?p=289

It's true that the 32-year bull market in bonds is over. If you need the money you've invested in bonds in, say, five years, that's a problem. But over 20 years, the reinvestment of higher yields will offset the decline in price; as the time horizon lengthens, the reinvestment of coupon becomes an e...

We should raise a toast to SPY, the original ETF, which is 20 years old today. Compared to most actively managed U.S. large-cap stock funds in existence 20 years ago (of which, 158 that started the race have dropped out), SPY has had superior performance, lower cost, greater tax efficiency and zero ...

See "Keeping Score" at http://simplesmartinvesting.com/?p=212

The answer depends on why you own bonds in the first place. If the answer is: to serve as a hedge against economic contraction and equity bear markets, then you should stick with Treasuries, because they serve this purpose better than any other bonds. If the answer is: to reduce total portfolio risk...

Is your portfolio diversified into different asset classes with the objective of reducing overall portfolio risk? (This is investing 101, so I presume the answer is yes). Well, if you don't rebalance, you undermine the whole point of diversification. Rebalancing is the opposite of market timing: mar...

I'd advise you to stay away from TIPS, since they are very overvalued and likely to generate negative real rates of return over the next five or so years (and ditto nominal Treasury bonds). See http://simplesmartinvesting.com/?p=183

Couple of suggestions: 1. Unnecessarily complex. A mix of 50% US Total Market/35% Non-US Developed Markets/15% MSCI Emerging Markets will give you sufficient diversification. The one exception I'd make is the Wellington Energy fund, since the companies in that fund will do better than the market if ...

Here's some advice on how to select an investment adviser: http://simplesmartinvesting.com/?p=175

Good luck!

The models used by investment advisers to assess risk and map out asset allocations are both useful and dangerous. They're useful because they enhance our ability to evaluate the trade-offs among competing options. They're dangerous because they provide an illusory precision which can seduce us into...

Thanks for all comments--whether in disagreement or not! I certainly didn't mean to imply that problem with TIPS was unique to this class of bonds--and don't believe I said that. In fact, I had previously written about the prospective negative real rates of return from nominal Treasuries (see http:/...

Many financial advisers continue to recommend a significant allocation to TIPS in their clients’ tax-deferred retirement accounts because they regard this as a good way to protect these assets against future inflation. They input TIPS historical returns into their models and, voila, excellent inflat...

An interesting footnote to this discussion is the fact the U.K. inflation-indexed bonds ("linkers"), which have been around since 1981, have shown no correlation with U.K. inflation and nobody seems able to explain why this has been so. The ideal environment for TIPS is stagflation, since ...

TIPS' returns are a function of: actual CPI-U, the option value of the principal guarantee, actual real yields, expected real yields, the risk premium investors pay for assuming real interest rate risk, and any liquidity premium or discount prevailing in the market at the time of purchase. (Liquidit...

If you're a high wage earner, you're obviously still working (not retired), in which case I question your assertion that you're a "conservative" investor. Presumably conservative investors' main goal is to preserve the value of their capital. This means that you have to take inflation into...

Renata, Your question is really how best to implement the 60/40 asset allocation. And you've received good advice. But my question for you is: what age are you? Because unless you are 60 or older, I don't think you should have 40% allocated to bonds if these monies are retirement savings. Why? Becau...

Your age is a critical component of your question. Sorry, boggleheads, but I cannot agree with Jack Bogle's advice that one's bond allocation should be the same as one's age. For example, a healthy and relatively affluent 50-year old might reasonably expect to live another 35+ years. No investor wit...

Unfortunately, anyone can hang out a shingle as a "financial advisor" without having any qualifications whatsoever. As a result, many so-called "financial advisers" are simply salesmen. Many others may have financial planning expertise (with a CPF designation) but know very littl...

If you'll need the money in five years or so, you should not invest in anything intermediate (e.g., up to ten years) or long-term. You should use the Vanguard short-term corporate bond fund; you won't earn much return, but the money will be there when you need it. For someone with your investment ti...

I would not advise investing in either REITs or inflation-indexed bonds today as both are very overvalued and likely to generate very poor returns going forward. Buy REITS when they sell at a discount to NAV not a premium and inflation-indexed bonds when their real yields exceed 2.5% or so, not when...

The recommendation re donor-advised funds is excellent. "Lottery-sized" is rather vague. If the assets amount to tens of millions of dollars, you might consider creating a family foundation, which would be a tax-exempt entity, but this would constitute an absolute commitment to donate a mi...

Since these are retirement savings accounts and you are in your 20s, you should have zero cash and zero bonds. You should be invested 100% in equities, and should keep it as simple as pie by investing in total market index funds. Why no bonds? Because future bond returns are dependent on the startin...