Investing for Retirement: Asset Allocation & Building a Diversified Portfolio

The central challenge to long-term investing is not how to increase returns; instead, it is how to manage risk. The solution is to construct a diversified portfolio tailored to your particular risk tolerance. Overall, it is key that you understand how your portfolio behaves during changing market and economic conditions so that you can stick with your desired asset allocation. Continue reading Investing for Retirement: Asset Allocation & Building a Diversified Portfolio

Investing for Retirement: Asset Classes That Individual Investors Should Avoid

For individual investors, non-core asset classes fail at least one of David Swenson’s rules. There are a number of fixed income investments that serve no valuable portfolio role for almost any investor. And, there are a number of actively managed asset classes that are only suitable for extremely sophisticated institutional investors, capable of investing in illiquid markets and possessing very long time horizons. Continue reading Investing for Retirement: Asset Classes That Individual Investors Should Avoid

Investing for Retirement: Core Asset Classes

In order to build a diversified portfolio, you must first select asset classes that have minimal correlation with one another. David Swenson, the Chief Investment Officer at Yale University, presents one of the best overviews of core and non-core asset classes for individual investors in Unconventional Success: a Fundamental Approach to Personal Investment. Here, we will focus on core asset classes. Continue reading Investing for Retirement: Core Asset Classes

Investing for Retirement: Actively Managed Investing

It is nearly impossible for active managers to beat the market over the long term after taking management expenses, transaction fees, taxes, and risk into account.  Individual investors don’t have the time or resources to compete with institutional investors. The only rational path for individual investors is to invest in passively managed index funds. Continue reading Investing for Retirement: Actively Managed Investing

Investing for Retirement: Building Your Net Worth by Budgeting, Saving & Investing

Your first goal is to not spend more than you earn. In particular, do not carry credit card debt month to month. There is no point in trying to figure out how to maximize return for a given level of risk if you are in debt beyond your home mortgage (~4%) and low interest (1-2%) car loans. The reason for this is that you likely are spending more on interest for your loans and, particularly, credit card debt than you ever would recoup by investing an equivalent amount minus fees, taxes, and your high interest debt. Continue reading Investing for Retirement: Building Your Net Worth by Budgeting, Saving & Investing

Investing for Retirement: Overview

I began writing this book after several family members asked me for my perspective about investing for retirement. I shared a number of links to dense financial books and online financial management sites. For some reason, they didn’t have the time or inclination to read several bookshelves of books on investing. Instead, they asked me to distill all that information into something more straightforward. This book addresses investing for the typical individual investor. The information herein reflects the financial and investment knowledge that I believe everyone should possess. Continue reading Investing for Retirement: Overview