Stocks and Bonds

Alternative Investments

Many investors are less than enthused about the current valuations of traditional investments like stocks and bonds. After a decade-long bull market where the S&P 500 averaged more than 16% per year as of April, stocks are trading at historically high valuations. Bonds are offering very low yields compared to prior decades and the Federal…

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Has the 60/40 portfolio lost its mojo?

Ever since the start of the huge bull market in the 1980s and 1990s, the 60/40 portfolio was a great way to reduce the volatility in one’s portfolio. The bond portion of the portfolio would spit out 6 to 8 percent yields and, just as importantly, the bonds would tend to rally and yields would…

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Maximizing the tax benefit of charitable donations

With the new tax laws, it has become potentially more difficult to receive optimal tax treatment for one’s charitable donations. Married couples filing jointly now have a $24,000 standard deduction. Unless the total itemized deductions are more than $24,000, it won’t pay to itemize. Moreover, big deductions of the past for state property tax and…

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Past performance is no guarantee of future results

There is a universal disclaimer that warns investors not to assume that the recent results of any particular investment will continue into the future. Despite this warning, when contemplating potential investment strategies, investors tend to place excessive weight on recent performance. After all, who wants to invest in a fund that lost 20 percent in…

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Uncapped index annuities as an alternative to bonds

I recently attended a lecture with Roger Ibbotson, an emeritus finance professor from Yale business school, and had the opportunity to speak with him afterward. Ibbotson recently completed extensive historical research on the performance of bonds versus uncapped index annuities. Traditionally, index annuities placed caps or limits on upside performance. Uncapped index annuities do not…

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How diversified is the S&P 500 Index?

The S&P 500 consists of 500 of the country’s largest publicly traded companies. These companies include the following sectors: energy, technology, consumer staples, consumer discretionary, financials, health care, industrial, materials, telecommunication, utilities and real estate. At first glance, this seems like adequate diversification. However, the S&P 500 is market cap weighted, which means that the…

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