Establish Basic Principles of Investing What does Occam’s Razor* principle have to do with investing? Furthermore, what is Occam’s Razor? The principle states that “Entities should not be multiplied unnecessarily.” The principle is attributed to the 14th century Franciscan friar, William of Ockham. Isaac Newton stated the Occam’s Razor another way with this rule. “We […]
Harold Evensky’s Definition of Active vs. Passive Portfolio Management
Debating which investing style, passive or active, is the superior method is unlikely to end soon. The research is too conflicting and exceptions still exist. The difference of opinion has a long and acrimonious history – and it continues to this day. Before we enter the debate and provide some opinions, it is important to […]
Goofus vs. Gallant
As a small boy, my family subscribed to a magazine called “Children’s Activities.” Each issue contained a story of two characters, Goofus and Gallant. We all wanted to be like Gallant, although we frequently found ourselves behaving like Goofus. Here is another Goofus/Gallant tale, this time with help from a publication written by the late […]
Nine Critical Investment Decisions
Nine Critical Investment Decisions 1. The Decision to Save or Not to Save 2. The Go-It-Alone or Professional Manager Decision 3. The Decision to be a Passive, Active or Mosaic Investor 4. The Decision to Use Index Funds or Stocks to Populate the Portfolio 5. The Asset Class or Sector Class Decision 6. The Asset […]
Reviewing The Fundamentals of Investing
Search this blog site for “The Golden Rule of Investing” and you will pick up the basic ideas of Rule #1 of Investing. The Golden Rule of Investing is – “Save as much as you can as early as you can.” Burton Malkiel puts it this way. “The amount of capital you start with is […]
Keep It Simple
Don’t be surprised if you don’t know the difference between a benchmark ETF and a strategic ETF. Strategic is sometimes called “Fundamental” or “Active” and they differ from the ETFs we recommend for our ITA portfolios. To read more about the differences, check out the URL referenced below. Richard Ferri writes about the increasing complexity […]
The True Cost of Professional Management
What is the true cost of professional management if the fees run somewhere between 50 and 100 basis points? To figure this out let’s use 90 basis points (0.9%) charged by one well-known financial advisor as it is about average for the industry. We need to make a few more assumptions and one is the […]
Defining Risk
Risk is a messy word as it carries so many different meanings in the investing world. In the most general sense, it means we don’t know what is going to happen. Here are several specific meanings of the term. We will begin by defining “systematic” and “specific” risk. 1. “Systematic” risk is risk we cannot […]
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