DIY Personal & Retirement Financial Planning

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Individual Investors

American Funds – Capital World Growth and Income Fund – Class A Shares (CWGIX) warrant a +2 Fund Authority Score

Fund Authority Scores rate mutual funds and exchange traded funds (ETFs) on the most important economic factors that influence individual investors’ net long term diversified investment fund performance. The Skilled Investor developed the Fund Authority Score system to provide individual investors with concise and objective summaries of mutual funds and ETFs for comparisons within investment […]

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American Funds – EuroPacific Growth Fund – Class A Shares (AEPGX) get a +2 Fund Authority Score

The diversified investment fund strategy of American Funds’ EuroPacific Growth Fund According to American Funds’ Annual Report for the EuroPacific Growth Fund, the fund “seeks long-term capital appreciation by investing primarily in the securities of companies based in Europe and the Pacific Basin.” American Fund’s 497 filing on the U.S. Securities and Exchange Commission EDGAR […]

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Vanguard Total Stock Market Index Fund (VTSMX) achieves a +9 Fund Authority Score

The diversified investment fund strategy of the Vanguard Total Stock Market Index Fund According to the Vanguard website, the investment strategy of the Vanguard Total Stock Market Index mutual fund is to use a “passive management—or indexing—investment approach designed to track the performance of the MSCI® US Broad Market Index, which represents 99.5% or more […]

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How to distinguish between true investment skill and luck

Even if an investor has obtained superior results over an extended period, is this sufficient proof that these investment results were actually due to skill rather than just a lucky streak? No, these investment results could still be due to chance. For example, take a large population, such as all individual investors in the U.S., […]

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Chance creates the illusion that individual investors can beat the stock market

“Market efficiency” makes it very difficult for individual investors to “beat the market.” Making their own decisions, individual investors perform so poorly that on average their investment returns lag behind the returns that one would expect from random stock selection. The average professional trader does somewhat better than amateurs do, and professionals probably do so, […]

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Can you really beat the stock market?

You are not likely to beat the stock market, despite all the cheer leading from the securities industry and the financial media. When you try to beat the public securities markets, unfortunately you are more likely to trail the market’s return, because of extra costs, taxes, and investment mistakes. The idea that investors can beat […]

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Diversify with Low Cost Index Mutual Funds and ETFs Only

During the last twenty-five years of the 20th century, mutual fund and exchange traded fund portfolio assembly costs declined dramatically. Brokerage commissions were deregulated in 1975, and transaction costs have fallen very dramatically since then. Furthermore, well-diversified, low-cost index mutual funds have now become commonplace, while none existed in 1968. The mutual fund industry was […]

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Conclusion to: What Is a Well-Diversified Investment Portfolio?

<<– Continued from Part 1 Find Home Financial Planning Software In addition to showing that large numbers of additional stocks are required to achieve measurable improvements in diversification, the Evans and Archer study clarified other requirements for a well-diversified portfolio. The number of stocks selected for a highly diversified portfolio also depends on what one […]

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What is a Well-Diversified Investment Portfolio?

A well-diversified portfolio contains a very large number of individual stocks and/or bonds that are selected without bias toward particular economic segments. A fully diversified portfolio will approximate the global publicly traded securities markets. The question about diversification most frequently asked by individual investors is “how many stocks or bonds do I need to be […]

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Commentary on How Many Mutual Funds are Needed for a Well-Diversified Portfolio

For holding periods of many years, diversification improves dramatically, when you hold multiple actively-managed mutual funds in an investment portfolio. In “How Many Mutual Funds Constitute a Diversified Mutual Fund Portfolio?,” Professor Edward O’Neal of the University of New Hampshire at Durham tackled the important question of how much an investor could improve on diversification […]

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How Many Mutual Funds are Needed for a Well-Diversified Portfolio? – Evidence

Actively-managed mutual funds are not created equally. Performance can vary significantly – even when funds pursue similar strategies or “styles.” This article addresses the impact on portfolio diversification of holding more than one actively-managed mutual fund. (For the companion article to this, see: How many mutual funds are needed for a well-diversified portfolio? – a […]

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Diversify To Avoid Investment Fraud

Another kind of investment diversification that individual investors should consider important relates to the failure or corruption of the financial industry intermediaries and fiduciaries that hold individual investors’ securities. This meaning of diversification has nothing to do with scientific investment principles related to optimal portfolio diversification. However, it is still very important. Prudent investment practices […]

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The Never Do List – Avoid Financial Advisor Frauds and Scams

Part 2 of the The Never-Do List – 22 Good Ways to Avoid Financial Advisor and Investment Counselor Frauds and Scams This article discusses things that you should “never do” with a financial planner or investment advisor, and it covers fees, payments, and proprietary investments. You should never do certain things with a financial planning […]

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Understand the Confusing Securities Market Motion Picture

Securities markets are usually very quick to adjust prices to reflect new information. However, this price adjustment process may take longer and be more volatile, if the new information is ambiguous. At any point in time, market participants will already have used more or less rigorous valuation methods to judge their expected risk-adjusted value of […]

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Investment Valuation and Securities Risk for Individual Investors

The securities markets provide an evolving consensus of the risk-adjusted value of particular securities. By understanding how the markets value securities, individual investors can chose more durable investment strategies Judging the potential usefulness of different investment strategies requires some understanding of what the public securities markets really do. This article discusses how the markets price […]

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