Over the last 12 months, Vanguard’s Intermediate-Term Treasury fund (VGIT) has lost more than five percent (5%+) of its value. Long-term investors not phased by this short-term volatility can benefit from tax-loss harvesting.
The Diversification Myth of Alternative Investments: How Illiquidity is Mistaken for Low Correlation
Alternative investments are investments that are not stocks, bonds, or cash. The list of alternatives is endless: real estate, hedge funds, private equity, venture capital, timberland, fine art, farmland, reinsurance, private lending, and more. Alternatives are often pitched as a magical way to diversify an investment portfolio. They are said to be immune from the […]
Everything is Correlated: Debunking the Sales Pitch of Private REITs, Syndicates, and Other High-Fee Real Estate Funds
Twice now, clients have shown up for a portfolio review when holding Blackstone’s REIT fund. Depending on which version of this fund you have, you may pay between 1.25% and 1.50% in annual fees. That outrageous fee is in addition to a 12.5% performance fee for returns over five percent. Said simply: it’s expensive. Given […]
More Risk for Less Return: Why Paying Off Debt – If Investing in Bonds – Make Sense; or Mortgage Arbitrage with Low Interest Rates
SUMMARY: Pay off debt if bonds make up any part of your investment portfolio. Even with a portfolio as aggressive as 90% stocks and just 10% bonds, anything with a non-zero interest rate should be paid off. This idea – to prepay debt if investing in bonds – comes as a surprise to those investors […]
Future Housing Returns are Stark
In the June 2021 issue of the Financial Planning Association’s Journal of Financial Planning, I wrote a short piece on housing. In the article, I pointed to the rise in prices. I argued that while housing has done well over the last couple of decades, that trend may not continue. Given that uncertainty, funding retirement […]
How to Interpret Monte Carlo Outcomes
How do I present probabilistic outcomes (i.e., Monte Carlo simulations) to financial planning clients? I was asked this question recently – while consulting with a company on developing their financial planning software. Fortunately, the answer is straightforward: frame Monte Carlo results not as the likelihood of financial plan failure, but as the “probability of adjustment.” […]