The Flight Path Approach to Age-Based Asset Allocation

Asset allocation models based on an investor’s age tend to be inherently flawed. They state that young people should be heavy in stocks and old people heavy in bonds. The idea sounds passable, but it doesn’t fit how many people actually act or what they may need. Age-based models assume all young investors have a [...]

A Second Look at P/E Ratios (Part II)

Price-to-earnings (P/E) is probably the most often used bellwether for stock market valuation, yet it is often misunderstood because of distortions. In my first article, I introduced the concept of price-to-peak operating earnings (P/POE) as a way to smooth out distortions that are caused by recessionary declines in corporate earnings. In this article, I’ll examine [...]

A Second Look at P/E Ratios

The stock market is an endless tug-of-war between bulls and bears. Bulls are optimistic about the future and bears see problems. At the core of this battle is a disagreement about stock market valuation. More specifically, how much is a dollar’s worth of corporate earnings worth?  This is Part 1 of a two-part article, and [...]

Investment Principle Matters to Principal

What you believe about how markets work has a meaningful impact on long-term return. Do you believe markets are relatively efficient or do you believe there are ample opportunities for excess profits? Your beliefs drive investment strategy and your strategy drives portfolio performance. Big picture beliefs about investing can be divided into two categories. First, [...]

Why Financial Advisers Lie

Financial advisers lie. Not all the time, but often enough to matter. Most lies are small and amount to fudging the truth to build fame and fortune. There’s no harm in that, right? I don’t think clients would agree. Advisors want to believe they’re successful and will go a long way to prove it to [...]