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Wealth Building Strategies

Is This 80/20 Portfolio the Best Plan for Your Money?

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Posted by Bill Bonner - Diary of a Rogue Economist

on Wednesday, 04 November 2015 12:24

Time to Be in Stocks?

DRE-Bill-BonnerYesterday, we learned from Wall Street Journal reporter Brett Arends that this is the best time to invest in the stock market: 

"The best estimates argue that over the long term, stocks have beaten bonds, cash and deposits by an average of about 4 to 5 percentage points a year. Compounded over time, that has amounted to an enormous difference. After 30 years, someone who invested in stocks has often ended up with three times as much money as someone who kept it all in cash and bonds. 

Meanwhile, those gains have typically all come during the winter months. Peculiar, but apparently true. The most recent academic study, which has looked at stock markets around the world and went back in some cases more than 100 years, has found that winter has beaten summer pretty consistently in almost every country and almost every period."

Point? 

If you want to do well with your investments, you will buy stocks… and buy them now. 

Arends goes further. He tells us how much of our money we should have in stocks. Citing the work of valuation expert Andrew Smithers, he concludes that… 



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Wealth Building Strategies

10 Wisdom-Based Wealth-Building Strategies

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Posted by Gala Gorman

on Tuesday, 03 November 2015 15:52

UnknownWhile any approach to creating financial security must suit the values and needs of the individual, these are the Top 10 Wealth-Building Strategies that I believe will ensure that you can weather any storm life sends your way. 

1.Use the A-R-KTM Technique.

A.A is for Accumulating Assets. This may seem like a simple concept but in today’s challenging circumstances it is much too easy to spend everything you make and more.

B.R is for Retiring Debt. Debts aren’t called liabilities for nothing. You need to work towards reducing and eliminating debt when everyone else is focused on using every ounce of equity.

C.K is for Keeping Commitments. Once you make a commitment to yourself to apply the A-R-K TechniqueTM, you need to keep it! You build confidence in yourself and others this way.

.....continue reading 2 through 10 HERE



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Wealth Building Strategies

BUYER BEWARE - don't be fooled by "style drift"

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Posted by Paul Philip

on Monday, 02 November 2015 09:53

style driftWhen you hear the term STYLE DRIFT, the first thing that might come to mind is that you’re dressed in last year’s fashions, or that you’ve made a fashion faux pas. However, STYLE DRIFT is a much more serious issue, it refers to a fund manager moving away from their stated objectives and can make the fund returns misleading. When you own something you haven’t actually intended on purchasing.... 

CLICK HERE to watch the video

The Evidence-Based Investor Video series is a service provided by Paul Philip and the team at Financial Wealth Builders Securities



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Wealth Building Strategies

The Best Wealth Building Strategy of All

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Posted by Robert Zurrer

on Thursday, 29 October 2015 11:20

100-100
 
The 5.5% "Equity Risk Premium” is the reason that purchasing quality stocks is the best wealth building strategy. 

One look at this 115 year chart of the Dow Industrials reveals that despite World Wars, Depressions and financial catastrophes, stocks have always produced outsized returns. Outsized returns for the very patient mind you, but outsized returns nonetheless. Take a look:

  • The long-term, more than 100-year performance: Since 1900 (end-of-year 1899), through 2012, the average total return/year of the DJIA was approximately 9.4%  -- 4.8% in price appreciation, plus approx 4.6% in dividends. 
  • The average annual stock market return for the past twenty-five calendar years (since 1987) was 10.6% (7.9%, plus 2.7%)  The market was up over 40% before the October 19, "Black Monday," crash. After a significant recovery, the Dow actually closed up 6% for the year. (For further time periods and statistics go to Observation HERE)

So even in an absolutely worst case scenario of an investor buying the index at the very peak of the Dow at 381 in 1929, that person would have been even index wise 25 years later and have well more than doubled (including dividends) long before the Dow hit its peak at 1000 in 1966.

In a better scenario you will get the likes of a quality stock buyer like Warren Buffet earning a 20% annual return over the period 1965 - 2012, a period that just happened to have one of the longest stretches of stock market underperformance between 1966 - 1983, not to mention the crashes of 1987 and 2008.

When you invest in stocks, you must know there will be periods when stock market returns will go negative, and you must accept the risk of occasional bear markets. But you do get paid for it through the "Equity Risk Premium. Or in other words you earn more in return for being willing to endure periods of loss. (Ed Note: Currently that premium is estimated be 5.5% over 30 year Treasury Bonds, or over the long term stocks will outperform Treasury Bonds by 5.5%)

Summary:

Over the long term at least, the return on stocks is greater than bonds. 

Current State of the Markets

The Central Banks zero (now minus zero) interest rates, stimulus from the ECB, China, Japan and directly and indirectly from the U.S. Federal Reserve will ultimately force equity prices higher. Nevertheless recent stock market gains lead me to believe that keeping 25% cash take advantage of any further selloffs is a good idea for now. Marc Leibovits recent advice is also very wise:

"eliminating long-term bonds from your portfolios, avoiding the most rate-sensitive sectors of the stock market, sticking only with the highest-rated stocks in powerful sectors experiencing their own private bull markets, and dabbling (gingerly) in the most beaten-down, dirt cheap stocks that already reflect a huge amount of pessimism."

In my opinion some of those dirt cheap stocks definitely reside in the precious metals sector, and for those more cautious you can always use the options market to reduce your risk. 

Robert Zurrer

 

 

 

 

 



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Wealth Building Strategies

What I Learned From Value Investor Guy Spier

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Posted by Vitaliy Katsenelson - Guru Focus

on Thursday, 29 October 2015 06:26

Screen Shot 2015-10-29 at 6.20.05 AMAutobiographical work reveals practical side of investing

Guy Spier is a "tremendous value investor" who has his his bachelor’s degree from Oxford and MBA from Harvard. Guy has written a book that is "the most untraditional book on investing you’re likely to run into." called "The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom and Enlightenment."

Perhaps in a time where Value Investing has never been more important you can get an idea of Guy's approach by reading the rest of the article HERE - Editor Money Talks



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