Dear friends,

Welcome to spring. Meteorological spring, anyway, that brief interval when the Quad Cities are wedged between end of snow and the beginning of flood, between the end of hockey and the start of minor league baseball, between the days when you can’t imagine the end of winter and the ones where you can nearly taste the arrival of spring.

Celebrate it all, since it’s Continue reading →

A tradition dating back to the days of FundAlarm was to annually share our portfolios, and reflections on them, with you.

Four rules have governed my portfolio for the past 15 years or so.

1. I maintain a stock-light asset allocation.

For any goal that’s closer than 10-15 years away, stock investing is speculation. Stocks rise and fall far more dramatically than other investments and, once they’ve fallen, it sometimes feels like they can’t get up. Equity income funds are typically very conservative vehicles, and yet they took four years to regain their October 2007 peaks. International large cap core funds took seven years to reach break-even while domestic large-cap core funds were underwater for five-and-a-half years. The worst-hit categories languished for nine years.

Research conducted by T. Rowe Price and shared here, on several occasions, led me to conclude that I wouldn’t gain much from a portfolio that exceeds 50% stocks. My target allocation is 50% income (half in cash-like investments, half in somewhat riskier ones) and 50% growth (half in firms domiciled in the US and half elsewhere). Based on a review of 70 years of returns (1949-2018), this allocation would typically Continue reading →

The typical American of today has lost all the love of liberty that his forefathers had, and all their disgust of emotion, and pride in self-reliance. He is led no longer by Davy Crocketts; he is led by cheer  leaders, press agents, word-mongers, uplifters.

H.L. Mencken, “On Being an American” (1922)

On balance, it is somewhat hard to believe that in a few short weeks, we have gone from the domestic markets hitting new record highs, albeit with a continuing narrowing of breadth, to what is a full blown correction, with the markets now off by more than ten percent. And as we look to Monday, the first trading day in March, the question is have we reached a floor, or is this going to continue on for some time, wiping out performance gains for all of this year and go on to erase all or a substantial part of 2019’s profits.

What triggered the sell off this past Monday, which was a global event? More than likely, it was Continue reading →

In this third of a six part series on the Six Rules of Investing, I look at risks and the ability of the investment environment to withstand shocks. This article is divided into four sections: 1) The Investment Environment, 2) Looking for the “Known Unknown” Risks, 3) Investment Strategy For Uncertain Times, and 4) Funds for Uncertain Times.

In February 2002, Donald Rumsfeld, the then US Secretary of State for Defense, stated at a Defense Department briefing: “There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.”

Donald Rumsfeld, US Secretary of State for Defense Continue reading →