Hi Guys,
A few days ago Catch22 posted a request for a little help in constructing a portfolio for a retiring couple. The response was huge, literally a tidal wave of informed questions and excellent suggestions. That was somewhat surprising given the fact that the profile for the retiring couple indicated that they were relatively well healed, and, for the most part, had pretty much all their ducks in proper alignment.
This was not a problematic assignment, yet the enthusiasm was infectious. Retirement planning occupies every investors planning process at least one time. It is one of the seminal events in a lifetime. The decision itself and the decision making process are stressful but necessary exercises.
Although decision making is more art then science, most retirement planning experts favor examining multiple options and doing “what if” scenario drills. That’s because the future is so uncertain. The decision to finally pull the retirement trigger is often painful. Sometimes analysis paralysis adds to the discomfort. The saving news is that there are some nice resources nearby on the Internet.
The mathematical tool that is specifically designed to address uncertain outcomes is Monte Carlo simulations.
All the major mutual fund houses acknowledge the retirement decision tipping point and the mental anguish it precipitates. They have reacted with free excellent Monte Carlo-like planning tools. That’s good.
I know, I know you’re saying” there he goes again”. That’s true. But within the last month I discovered a “better” Monte Carlo tool. I promise this is the last such posting (well at least for a few weeks).
Some investors are predisposed against statistical analyses, especially Monte Carlo techniques. It is perceived as far too mathematical, too exotic, too sophisticated. Nonsense; you need not know how to build a car to use it. There is financial risk to such ruinous behavior. The mathematics and the random selection of parameters is not conceptually complex; it is quite simple.
If that’s true you might ask, then why is the method not more commonly applied? The answer is that it is, especially since the proliferation of the home computer.
The speed of the modern computer allows the simple procedure to be executed thousands of times while a labor intensive pencil-and-paper approach could only evaluate a single scenario. The particular code that I will recommend does 10,000 random cases for each situation specified. Decision making teachers all endorse multiple option explorations over limited examinations. That’s the beauty and primary advantage of Monte Carlo simulations.
There is a large and constantly growing band of brothers who are recognizing its benefits and applying the Monte Carlo approach. It is a specifically suited tool for exploring uncertain events to estimate probabilities. The expanding field of advocates are found in the Mathematics, Physical Sciences, Computational, Engineering, Business, Financial, and Retirement Planning communities. From its limited World War II era introduction, it is now a ubiquitous tool.
In an uncertain environment, having some formal procedure to estimate the success odds of any project and its options is of paramount importance.
As behavioral researchers Belsky and Gilovich remarked: “Odds are, you don’t know what the odds are”. In some sense, investing is a form of gambling. Award winning economist Paul Samuelson cautioned that “It is not easy to get rich in Las Vegas, at Churchill Downs, or at the local Merrill Lynch office”. However, investing is not a Zero-Sum game. Odds can be tilted to favor the patient, prudent, and informed player.
The recently discovered superior Monte Carlo simulator is from Flexible Retirement Planner. Please consider exploiting this especially useful aid to the retirement decision process:
http://www.flexibleretirementplanner.com/wp/
or more directly to the simulator itself:
http://www.flexibleretirementplanner.com/wp/planner-launch-page/
It is very fast, very flexible, and very worth a visit. This particular Monte Carlo code was written by an experienced, practical, retirement specialist. The calculator’s organization clearly demonstrates the benefits of his hands-on experience.
Monte Carlo analyses are the only investment tool that yields a reasonable estimate of the odds for a successful retirement. It certainly is not perfect, but it is far better than a crystal ball. By using it to explore various retirement and investment options, a candidate retiree can adjust his plans to improve his performance.
Understand that Monte Carlo codes never guarantee 100 % accuracy. That’s impossible in an uncertain world full of unknowable Black Swan happenings.
Many industry specialists suggest that retirement be delayed until Monte Carlo simulations forecast a 95 % success likelihood. That means that there is a 5 % possibility of portfolio bankruptcy. There will always be residual risk in retirement. A parametric Monte Carlo analyses helps a candidate retiree to identify and to minimize that risk, not entirely eliminate it.
In some instances, the stock market will turn sour shortly into retirement. That is unfortunate but not fatal. Those retiring just before 2008 suffered that nightmare. No mechanical tool, no soothsayer could have forecasted that scenario. Don’t indiscriminately scapegoat the analytical tool for the Black Swan physical happening.
Please take advantage of this outstanding resource. It will be both a learning experience and an opportunity to assess your portfolio’s survival odds. Also, I suggest you do a few “what-if” exploratory cases to examine potential pitfalls and improvements. The referenced code makes that an easy chore.
Good luck guys. Some folks might even perceive running these codes as fun.
Anyway, I have fun making the Monte Carlo case. I shall now go quietly and happily into the night.
Best Regards.

Reply to @MJG: "Given your description, they are adequately knowledgeable in investment matters."
There may be another variable here: we're assuming that both members of this couple are equally "knowledgeable in investment matters". The description of this couples circumstances is virtually identical to ours, and unfortunately in our case the financial knowledge is emphatically not equally distributed.
What we have here is a situation where between pension income and future SS income it is unlikely that the investment pool will need to be utilized for day-to-day living expenses. In that case, thought must be given to the management of the investment pool after the demise of one of the two partners.
If both are equally financially adept, this may not be an issue. However if that is not the case, then should the partner lacking the financial acumen be the surviving partner, the future guidance of these assets does become extremely important. This would argue either for an extremely passive construct needing little if any active management, or perhaps the engagement of a trusted financial adviser.
None of this is easy.

Hi Catch,
It is a pleasure to be introduced to a couple who have managed their life together so well. They are in a grand place because of their composite financial skills and savings disciplines.
I suspect they need a robust congratulations more than a financial plan. They have made all the right choices. They only need to be encouraged to continue their march. Given your description, they are adequately knowledgeable in investment matters.
It appears that this couple are not interested in visiting FMO on a daily basis. Given their profile, a totally passive Index approach might be their cup of tea. Vanguard mutual funds/ETFs might satisfy all their requirements.
Why not simply show them Paul Farrell’s Lazy portfolios? As you know, these are summarized at:
http://www.marketwatch.com/lazyportfolio/portfolio/fundadvice-ultimate-buy-hold
Rather then linking to the general listing of all the Lazy portfolios, I directly addressed the FundAdvice Ultimate portfolio because it represents an integration of academic research findings into its construction.
That’s the first step of my two step education program. The second step is going to the explanation of how the Ultimate Buy and Hold portfolio was assembled. Here is the Link to that excellent summary paper:
http://www.merriman.com/PDFs/UltimateBuyAndHold.pdf
Paul Merriman builds and documents his recommendations in an orderly, logical fashion. He demonstrates how diversification controls risk by mitigating overall portfolio standard deviation. It is a comprehensive tour-de-force.
That’s all that is essential.
Depending on the size of the portfolio, I would allow the happy couple to add units to satisfy their preferences. I would contribute perturbation advice only after their first choices and ideas were clearly expressed. I want them to own the portfolio since they will more likely stay the course if they designed it themselves. Also, it adds to their confidence.
Since asked, I might proffer these peripheral suggestions and guidelines.
The folks seem to prefer a 50/50 equity/bond split. That’s conventional wisdom and might not reflect all the options really available to this well-adjusted pair.
At 65, at least one of them will survive for 20 plus years. Given the data, they are financially secure and have even planned for their wealth transfer to progeny. They have successfully touched all the mandatory financial bases. They are now free to plan like an institution instead of like individual investors.
A 50/50 mix might not be the best mix given their circumstances and the current poor interest rate environment. Perhaps they should entertain a more aggressive equity fraction. A 70 % equity percentage might be very acceptable. Of course, that depends on their risk aversion profile. The option should be presented; the final decision is always theirs.
If the total Index approach is too tame for the folks, I would certainly accept their desire for some active management psrticipation. I would remind them of how difficult a task it is to identify an active management team that will persistently generate positive Alpha. If necessary, I would evoke John Bogle and company to document that position. To satisfy any excitement tendencies, I would endorse a portfolio with a maximum of 20 % actively managed components. I really believe that 10 % is a more wealth preserving allocation.
Wow! My comments are a little frightening, even to me. Over decades, I’ve morphed from the active mutual fund management camp to a passive perspective. God, I fear I’ve been Bogleheaded. No not yet; at least not completely so.
Catch, I hope you find my rant helpful. My most salient recommendation is that you interact with these folks in a manner that they feel like the designers and owners of their portfolio. That feeling equates to a commitment to stay with the program even under challenging conditions.
Best Wishes.

All the added questions show how complicated this would be. I would go to a fee only financial advisor, lay out all this information and work on a total retirement plan. All you will get here is an assortment of favorite-fund portfolios that most likely won't fit you and your needs.
I personally enjoy the mutual fund portfolio game, but I know that the portfolio has to match everything else mentioned above. A fiduciary working personally for you is always a good investment, even if the meeting is a one time process. In fact, take a visit to the buckeye state and give BobC a call. Or is that blasphemy for a true "Blue" Michigan guy :)

Hi BobC,
You noted:
So are these people going to need any dollars from their investments?
>>> Not at this point in time. Their "net, after tax" pensions will cover their living needs with monies remaining.
Their pension income will cover the cash flow needs for now, but for how long? Regularly, once in a while? What is the percentage of withdrawal needed on a regular basis in the future? That number has a huge impact on allocation strategies.
>>> Their pensions, as is common, do not have a C.O.L.A. adjustments based upon CPI or similar. They are aware of purchase power loss from inflation from this circumstance.
Six to seven years forward will find both of them to begin the required minimum distributions from their "traditional" IRA monies, which will be 90% of their tax sheltered monies. The remaining 10%, more or less; is in Roth IRA's. Caluclations indicate that the RMD rates on IRA's are about 3.6% of the IRA values for the first year and increases slightly in percentage terms, going forward. Five years forward will also allow them to maximize their social security withdrawal amounts at age 70, versus any withdrawals prior to this age.
What is the maximum drawdown target?
>>> Their drawdown maximum would be near 5%; but the RMD (in 6 years) from the IRA's would include about 3.6% of this amount.
Do these people have long-term care insurance in place?
>>> This has been discussed, too. LTC insurance is not in place at this time; and the facts of the skyrocketing costs, insurers leaving the market place and existing contracts being adjusted for some folks will be investigated further. Although not LTC insurance, they will purchase supplemental insurance with their Medicare coverage; as well as drug prescription insurance. Their health background is very good; as well as that of their parents and family.
Are there any after-tax investment accounts, or is everything pre-tax?
>>> All monies to be invested is either traditional or Roth IRA's.
A brief summary would conclude that this couple have always been prudent with their monies, controlled their household budget/expenses and maintained a watch upon their invested monies. They have a good grasp of knowledge and overview of various investment styles and/or sectors to the point of understanding the variances. They understand the differences among the various equity or bond types/styles, be they domestic or international. They are not novice investors; and would be capable of asking very good questions, if having a discussion with an investment advisor. Other family members have stable employment and not likely to "move back home" to be supported and/or need financial help. Some monies from this couple will be placed towards 529 accounts for college.
Their good money habits over many years has allowed them to be at a most positive monetary point at this time in their lives. Although their pension monies will have much less purchasing power in 20 years, they will have income flow from SS (likely, with some form of CPI adjustments) and the RMD monies from the IRA's.
This couple has arrangements in place related to their estate settlement, upon their deaths.
They will enjoy their retirement time with some travel and not be sitting on their butts, at home, in the recliner chair.
Thank you, Bob. Hopefully, the above information provides a better overall view for consideration of their investments going forward.
Take care,
Catch

For the past couple of years, I've enjoyed reading and participating in this forum. Most recently, I've enjoyed the thread entitled "Selling PAUDX today" But, most importantly, I want to thank Mr. Snowball, the authors of the "Great Owls" list and many others for their contributions to this forum and to my overall financial education.
After reading Bob C's posting to the "Selling PAUDX today" thread earlier today, I decided to begin this thread. Over the years, I've tried to pick mutual funds and managers who I thought would do over the long run. I also try to pick a few managers/funds that might help in "special situations", for instance in positioning me for what I might think is an upcoming market "downdraft" (see the earlier thread that I started regarding "defensive" mutual funds). I've benefitted greatly from the unbiased advice here.
Given the various ideas (sell it, sell some, buy more) about PAUDX in that thread, I'm beginning to wonder if I should move more toward index ETFs. PAUDX (as one of my "defensive" positions) has shown a poor performance over the past several months. YAFFX (another one of my "defensive" positions) has shown a mediocre performance over the past few years.
I think I'm experiencing the classic problem of the individual mutual fund investor. I try to find good long term managers, but after I find them and purchase, they often then show poor performance. Then I don't know what to do (I think other individual investors are in the same indecisive mode - see the PAUDX thread). I also find myself buying funds near the top of a manager's "hot hand" and selling near the bottom.
Based on my performance benchmarks, I've underperformed over the past ten years, probably in large part due to mistakes described in the previous paragraph. I keep my "pie chart" allocations stable and rebalance annually, so that isn't the problem.
I see mutual funds helping me in two areas in particular, finding managers who will outperform in a down cycle (hopefully, YAFFX and PAUDX will help me there) and finding others who will outperform in less efficient areas of the market (e.g. emerging markets and international small cap). I'm not having much success, though, for reasons described above.
With great respect and gratitude to the contributors to this forum, I pose the following question: Should I just follow our friends' advice at Bogleheads and just purchase index ETFs? Perhaps I could keep a small portion of my portfolio (say 10 or 20%) for the "fun" part of investing - mutual funds. That 10 to 20% wouldn't be part of my core portfolio, but instead flexible global portfolio, long/short mutual funds and the like.

Hi Guys,
I am a natural skeptic when a novel investment approach is publicized as a breakthrough “Moneyball” concept. These type of discoveries are rare events to be treasured and exploited if verified.
My skepticism expands if the methodology is poorly documented. That skepticism grows still further if out-of-sample tests are not convincingly accessible. All this makes it easy to convert my skeptical persuasion into a Devil’s advocate position.
So, allow me to be a Devil’s Advocate with regard to the Transparent Value stock selection and scoring technique.
The Transparent Value management team has poorly documented its methodology; it is anything but transparent. Its proprietary Required Business Performance (RBP) stock selection criteria and its tightly coupled RBP probability metric (RBPP) remain a murky mystery. The documentation details are so sparse that a full understanding of the assumptions, its supportive database, and its complete out-of-sample tests are impossible to evaluate. In essence, it is mostly a black-box.
I do not buy black-boxes. I suspect you do not either.
Continuing with the baseball analogy, the RBP and the RBPP approach home plate with a few strikes against them from the get-go. The top tier modeling is based on an adaptation of the very imprecise 1959 Gordon Dividend Discount Model. The modification uses a discounted cash flow in the equation. The major adaptation is to reverse the equation usage to judge if a current price is under or overvalued. A buy decision is committed to only undervalued stocks.
Inverting and/or reengineering a dubious model that requires hard to guesstimate long term inputs is an unholy task and does not add precision to the approach. All this seems to be like putting lipstick on a pig.
Remember that the Gordon Dividend Discount Model originally needed a divided rate, an earning growth estimate, and an investment cost of equity (borrowing interest rate) as input parameters. These forward estimates need to be made in perpetuity. The modeling modifications do not lower the difficult input data hurdles. Good luck on that score without introducing a gross error.
The full analysis further requires a prediction of the stock or mutual fund managers probability of investment selection success to arrive at the RBPP measure. I surely do not know how that probability number is currently determined. But I can construct a likely statistical procedure.
The RBP folks examine data over the most recent 3-year performance period. Fundamentally, I believe that is too short a period of data accumulation. Regardless, I would form a probability of management acumen by simply forming the ratio of their past successful stock picks divided by the total number of trades made. If it is done that way, the methodology is wedded to past performance and is not forward looking whatsoever.
I am also not impressed with their numerical inclusion of behavioral investing aspects into their model. It is done in the manner of an error catch-basin. According to the formulation, only two outcome explanations for performance are recognized. The RBPP measures the success likelihood. The other outcome is a measure of failure and is assigned to a behavioral bias shortcoming.
Since these two outcomes define the entire universe of possible events according to the model, they must add to a value of One. Of course, that assumption presumes that their RBPP model is perfection. Fat chance. That type of thinking does not allow either endogenous or exogenous events like inflation, inventions, or wars to disrupt the forecast. Of course, these are non-predictable Black Swan events that always compromise the forecasting business, and make it a futile task anyway.
The RBP and RBPP methodology does not seem to have a convenient way to incorporate world and financial shocks into their scoring. It will likely not do an adequate forecasting job under these all too frequently occurring market jolts.
I don’t know if RBP and RBPP are legitimate breakthroughs or just another theory that will be consigned to the dustbin of investment history when tested in real world application. Only time and a more comprehensive data set will tell that story.
However, if like any idea that successfully survives a real world test, it will be quickly adopted by rivals. That’s what happened with the baseball “Moneyball” statistical technique. Billy Beane and the Oakland team no longer own a unique advantage. That’s precisely what consistently occurs in the investment community. Any advantages that results from intrepid research becomes recognized as such, and competition rapidly adapts and adopts to erode its effectiveness.
I’ll remain on the sidelines until more information becomes available and/or until an independent check is made with out-of-sample data. Academic verification is preferred. I’m somewhat surprised that academia has not responded to the challenge.
I agree with MFO’s Investor that without more transparency, a wait-and-see strategy is prudent.
Well, at least one Devil’s advocate has spoken. I hope it is helpful. I welcome your opinions.
Best Regards.

This is my first time using the X-Ray.
Cash 15 0 15
U.S. Stocks 32 0 31
Foreign Stocks 26 0 26
Bonds 28 -1 28
Other 0 0 0
Not Classified 0 0 0
Total 101 -1 100
U.S. & Canada 56.53
Europe 8.03
Japan 5.80
Latin America 0.80
Asia & Australia 28.15
Other 0.68
Not Classified 0.00
My expense ratio came out at 0.94% compared to the hypothetical 1.22%. Also, I am tending towards large cap too. My top three sector holdings are in real estate (17.62%) , financial (14.62%) , and consumer (11.25%). I hold ARYVX which made the real estate portion large. I have held the fund since inception so it has done very well until recently with the Asia downturn. I do have a high cash holding and that is something I should not change for several reasons.
I am debating any changes right now. Perhaps as the rest of the year goes by I might sweep profits out of ARYVX into one of the other holdings.
Thanks Max for bringing this up.

Reply to @msf: Not sure, but that might have been my point. If you're taking such poor care of your money that you're buying loaded funds without receiving good financial direction in return, there's evidence of a pretty serious problem in your thinking. While I don't expect that everyone will become financially literate, I do think that once you start handling large sums, you have an obligation to develop a basic set of clues. Or maybe it's just the lateness of the hour. As ever, David

Reply to @David_Snowball:
As OJ noted, the relationship you described is one form that a load supports, but not the only one. OJ went in one direction - asking about the investor who pays the load without getting the service. (Rationale for this law is best deferred for another day).
To address your comment, I prefer to go in the other direction - that loads can be used to pay for discretionary accounts, where one is in fact paying for investment management. I agree with you that the person who works with a lousy investment manger (aka financial adviser) has bigger problems than the performance of a particular investment.
But given such a relationship, it seems the problem is virtually identical to that of paying the fund manager for doing a lousy job. In both cases, the person being paid (one by the load and trailing fees, the other by ongoing management fees) is not earning his keep. And in both cases, there's little to no flexibility in the payment based on that performance. (Management fees infrequently have performance adjustments, but they're almost always miniscule.)

Reply to @David_Snowball: Well, the relationship that you've outlined is certainly true in some cases, as for instance with American Funds, where I believe that you need to access through an adviser, at least to establish an account.
But what about those funds that allow you to buy through an independent broker (Schwab, for example) or even directly (some funds of American Century, for instance)? Where does this "financial planning advice" happen? If an individual chooses to pay a load without benefit of an actual adviser it must be because he did the due diligence and financial planning himself. How come he doesn't get that load?

Reply to @Ted: Yes and no. Mutual funds are justified either on investment grounds or business grounds. "Investment grounds" define funds that have a reason to exist, they do something useful, they do it exceptionally well and the thing they do is distinctive. The first long/short fund could be justified on investment grounds, the 20th could not.
"Business grounds" define funds that exist because the advisor needs them, not because the investors do. If you're a bank and you want to keep the greatest possible fraction of your investors money, you need them to invest in in-house funds (Wells Fargo makes more money selling Wells Fargo fund than it does selling Chase funds) and so you need to have one fund in each of the boxes they're looking for (domestic large cap, domestic small cap, money market, intermediate bond, real estate ...).
Sometimes funds created on business grounds turn out to be exceptionally solid (several of the Tributary funds, for example) but that's not typical; these things are generally cash cows designed to cost as little and return (to the advisor) as much as possible.
So, you're right - there are clearly 7000 of the 7500 extant funds that couldn't be justified on investment grounds. They're of no use to you and me, except in that they help create the market inefficiencies that better managers might exploit. But they are critical elements of the system that keeps lots of financial services firms, banks and others, alive.
For what it's worth,
David

Reply to @msf: A sales load is a form of payment for a service that you've received. The payment is not for investment management (that's covered by the fund's expense ratio); the payment is for financial planning advice. If the advice you've received is "the best pay to put your money, trust me, is in Dreyfus Large Cap Equity" and you've taken the advice, you've got problems far greater than the economically inefficient acquisition of a single underperforming fund.
David

Here's the lede and quick highlights:
"Retail investors have led the summer stampede out of emerging-market stocks, bonds and currencies, pulling almost twice as much money as institutional investors such as insurance companies and pension funds. . . Since the start of June, retail investors have pulled $18.1 billion from emerging-market bond funds, about one-third of the amount they had put in since the financial crisis, according to fund tracker EPFR Global. By comparison, institutional investors have pulled $9.3 billion, or about 10% of their postcrisis inflows."
There was, so far as I saw, no e.m. equity flow data. The author attributes the rush out the door to fear that the Fed will end bond purchases. One advisor attributes it, in part, to a "60 Minutes" segment on failed real estate developments in China. Another advisor (Steve Blumenthal) argues that it's the exact opposite of what they should be doing and that the emerging markets are the world's most attractively-priced markets. (GMO agrees.)
There's some not-very-strong evidence offered that institutions are buying e.m. debt at substantial discounts.
For what it's worth,
David

Many, many more deserve to be liquidated.
How about...
GAMCO Mathers AAA (MATRX)
Nysa (NYSAX)
Newmark Risk-Managed Opportunistic (NEWRX)
Fidelity Advisor Financial Svcs A (FAFDX)
Invesco Pacific Growth B (TGRBX)
Rydex Electronics Inv (RYSIX)
Midas Magic (MISEX)
or even
Hussman Strategic Growth (HSGFX)
=)

Reply to @VintageFreak:
Hi VintageFreak,
I do rate passive Index investing as a complete, self-contained investment philosophy. It is but one of many. All of them have fundamental financial and investing axioms and practical rules embedded within them.
In my original post, I did acknowledge the existence of alternate philosophies, most of which endorse active components. One problem is that there is such a wide variety of active investment concepts that they would be difficult to fully characterize in a logical, orderly manner.
I suppose day-trading with a target to be market neutral at the close of each trading day and the long term “stay the course” passive investment philosophies serve as bookend examples of a broad spectrum of candidate philosophies.
A dominating second consideration in my post is that it is directed towards rookie investors, short on knowledge and even shorter on experience. Exposing these innocent investors to the complexity and subtleties of most active investment strategies would be unkind, unfathomable, and ultimately unrewarding.
Can you imagine the confusion if you required that a neophyte investor read and understand David Dreman’s classic “Contrarian Investment Strategies: The Next Generation”? Or the confusion if Edwards and Magee’s landmark “Technical Analysis of Stock Trends”, now in its tenth edition, were assigned study material? Nothing would be accomplished except a loss to instructor credibility.
The passive Index approach is the simplest form of investing; financial education should start with that easy to describe discipline. If you are planning to enlarge a person’s mathematical skills you are likely to start with algebra lessons and not complexity theory.
If the books I suggested do not whet the students’ appetite or they do not pledge a commitment to ponder 200 pages of easy text, then they are doomed to fail in the investment game. Sorry, but that’s the likely outcome.
Okay, I understand that young folks today need and demand their video in heavy doses. A few weeks ago I referenced an informative and entertaining video that was produced in England by one of its emerging mutual fund advisor firms. Here is a repost of that Link:

A boatload of investing wisdom is presented is this roughly one hour film. Use it as a training resource.
Yes, it is yet another commercial for passive Index products. But it is a very well done film and includes short pieces from many famous American Index proponents. Please access it. It is a superior investment educational tool.
I recognize that my recommendations are not the end of an investment learning program, but they will promote a fast departure from the starting gate. There is considerable merit to keeping it simple to keep the enthusiasm at a high level.
You clearly asked about a video series that presented more fundamental financial and investment concepts. Some of these can be accessed as part of university classes. They tend to be difficult for a novice.
But Khan Academy has specialized in the production of educational material for us common folk. They have a series that deals with financial and investment matters. The lecture series really does start at the ground level so it might be quite boring for reasonably well informed seasoned investors. Here is a Link to one of their investment series:
http://www.khanacademy.org/science/core-finance/stock-and-bonds/valuation-and-investing/v/price-and-market-capitalization
The lecturer uses a colored chalkboard technique as a teaching aid. The format is more like a friend talking to you instead of a formal presentation. I hope your family will investigate and take advantage of this fine introductory material.
Enjoy, and teach your children (and your wife) well.
Let me know if the Khan Academy satisfies your clan educational aspirations.
Best Wishes.

Reply to @Maurice: Hi Mo. I liked the fund when I first invested as well. However, in the depth of financial crisis the fund not having long enough history and a large loss caused me concern.
At the time I also had, OAKEX as another small cap with longer track record. With the portfolio getting smaller I did not see the need for two funds anymore and consolidated consolidated from two funds into one. So, I did get most of the rebound that way.
Today, the manager of OBIOX is much more experienced. I think the fund is better positioned valuation wise as well. Both Investors and the management has learned from the experience.

Hi Guys,
To be perfectly transparent, I’ll immediately announce that this post might immediately bifurcate the MFO readership. It was designed to specifically help novice investors; it is likely far too simplistic to guide our market savvy, grizzled investors. The veteran MFO ranks might choose to stop at this juncture.
Over the last few weeks I have been alerted to the rather low knowledge base and sophistication of at least a small number of MFO readers and lurkers. It is somewhat painful to feel their market innocence. Without further education in this arena, these neophytes are doomed to the financial swampland and possible ruin.
Lurking and possibly asking a few questions will inform a little, but that is an unorganized and inefficient way to gain understanding. There are easier routes to the requisite learning that is not unduly costly or time consuming. In this post, I offer a couple of suggestions.
First, Warren Buffet himself provides some very good news with this quote: “Success in investing doesn't correlate with IQ once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”
So even if you are at the first-grader level in terms of investment sharpness, it will take just a little effort to reach a second grader standing. That modest level of proficiency will be sufficient for survival according to a large cohort of passive Index investor proponents. For example, Allan Roth has authored a book titled “How a Second Grader Beats Wall Street:”. Roth further supports his assessments with a Second Grader portfolio that is scored at the following Market Watch Lazy-man website:
http://www.marketwatch.com/lazyportfolio
All of the portfolios presented in the Lazy-man listing are worthy of consideration for novice investors. But the rookie investor should still seek to comprehend the whys of the investing process.
There are many truly great books that will provide the necessary background and fundamentals to solidly ground a learning investor. I own and have completely absorbed scores of them. Two terrific examples are John Bogle’s very practical “Common Sense on Mutual Funds” and Burton Malkiel’s classic “A Random Walk Down Wall Street” which is often freshened with its many updates.
However, these excellent introductions to investing are dense in data and lengthy in page count. They easily could intimidate an inspiring investor. Fortunately, simplified and much shortened versions of these fine books have been published. I recommend both Bogle’s “The Little Book of Common Sense Investing” and Malkiel’s “The Random Walk Guide to Investing”. Either book can be purchased for under 20 dollars and each is only about 200 insightful pages in length. These are breezy reads.
I also like Richard Ferri’s 142 page book “Serious Money”. Ferri offers this book for free from several Internet sources. He takes a strong advocacy position for Index investing as do the other two recommended short books. In that sense, they are not balanced expositions of all available options. That’s not a bad place to start the education process.
I hesitate to encourage further shortcuts, but many superior reviews of these references are readily accessible on the Web. One nice review of Bogle’s work from the Bogleheads guide that extracts succinct Bogle observations can be found at the following Ranjit Kulkarni Blog address:
http://ranjitkulkarni.com/2011/12/04/the-bogleheads-guide-to-investing/
That’s a pile of passive investment wisdom in a brief format. The quotes are terrific.
The recommended reading list only extols the virtues of passive-side investing. I make no recommendations for the more complex requirements of active investing. That is a multi-dimensional discipline that is evasive and difficult to master, especially since it is a dynamic art in constant evolution.
Note that I said “art” and not “science”. Active investing demands disciplined nuances and money management skills. Also, it requires personal emotional and behavioral controls that are not easy to describe. A very deep understanding of market mechanisms and interactions are mandatory. Experience is a contributing factor towards success. Active investing is definitely not for everyone, especially novice investors.
Novice investors should walk cautiously first, before ever attempting to sprint with the active crowd. They will quickly fall victim to the many traps that await active investing. Remember that even seasoned mutual fund managers overwhelmingly fail to outperform Index products over short 3-year periods. Neophyte investors have little chance for persistency in this quixotic marketplace.
I’ll end with this novice alert: You need to invest in learning about the marketplace and how it works before you imprudently lose your money investing ignorantly. You must master the rules and the odds of the game you need to play to protect your retirement. The learning price tag, in both time and money, is not especially high if it is done in an organized manner.
Best Regards.

"Fannie Mae and Freddie Mac, which have reported record profits after a taxpayer bailout, are ignoring billions of dollars in potential losses on overdue loans as they take three years to adopt a new accounting system, a government auditor said in a letter made public today."
“A substantial percentage of the GSEs’ recent earnings and the subsequent dividend paid to Treasury was a result of decreasing loan-loss reserves,” said Tim Rood, a former Fannie Mae (FNMA) executive and now managing director at Collingwood Group LLC, a financial services consulting firm based in Washington. “If the new accounting standard being imposed on them stopped or slowed the release of those reserves, it would have a direct and negative effect on the amount of dividend payments.”
http://www.bloomberg.com/news/2013-08-19/fannie-mae-and-freddie-mac-said-to-avoid-billions-in-write-offs.html

http://www.theglobeandmail.com/globe-investor/personal-finance/financial-road-map/are-you-a-savvy-investor-take-this-quiz-to-find-out/article13783641/
IMHO - i would bet >80% MFO board members think they are [I belong the in the 20% not]