Sectors and Asset Classes

This quarter, we saw that in 1-year returns ending March 31, 2024, Developed Freedom Investing had a -5.8% disadvantage, Emerging Market Freedom Investing had a +3.83% advantage, and Overall Freedom Investing had a -2.89% disadvantage.

Many people don’t understand how fixed income is priced, so let me take you through the math.

If China booms, it may be a mistake that we reduced the allocation. If China undergoes investment controls, it may be a mistake that we kept China at all.

In the past, we’ve shown some preference to Vanguard funds, but going forward we plan to show some preference to the cheaper Fidelity funds.

Biotechnology’s low correlation, the very thing that makes you dislike it, is specifically what gives it a place in efficient portfolios.

This quarter, we saw that in 1-year returns ending September 30, 2022 our U.S. Stock Strategy had a +4.11% advantage over VTI.

If you’re thinking about buying an I Bond, make sure it fits properly into your financial plan, and you aren’t just chasing the high interest rate.

Both are U.S. debt obligations which are adjusted by the Consumer Price Index, but they do so very differently.

Home bias is the tendency of investors to invest a majority of their assets in companies domiciled in their home country.

We think holding your next seven years of spending in relatively safe bonds is always a good idea. But holding too much in bonds may not keep up with inflation and is not ideal for your long-term investment strategy.

At the start of the year, purchases of all of these securities had no transaction fee at Charles Schwab. However in December 2021, Schwab added a transaction fee to some of the holdings.

We anticipated Consumer Staples to have a lower expected return but a larger risk-adjusted return and we expected Biotechnology to have very volatile returns with lower correlations to the other sectors. Both of those things happened in 2021.

An initial equal weight strategy of these 26 companies implemented on January 1, 2021 and held without further buys or sells through December 31, 2021 had a +8.64% advantage over the foreign healthcare benchmark.

We would expect the switch to Frankiln funds to save our clients 0.11% annually due to the lower expense ratio.

When reviewing our Foreign allocations, we discovered that the foreign Health Care sector has shown high risk-adjusted performance.

We believe these 26 companies will be an effective weight to add foreign healthcare to our portfolios.

Looking closer into each asset class, here’s how our top six asset classes performed between January 1 and December 31, 2020.

We hope this small increased exposure to foreign healthcare will help capture some of the efficiencies we believe to have found.

We believe that holding on to Energy and waiting for it to recover might mean missing out on greater gains elsewhere.

Individual sectors of the economy have reacted very differently to the pandemic.

While an efficient frontier graph cannot hand you a perfect asset allocation, it remains a useful tool in analyzing what the past can tell us about a wide variety of investments.

Here is a guide for how to find out what your bond is worth, decide whether you should keep it until maturity or cash out early, and how to get money for your paper.

We decided to add two new sectors after generating several hundred efficient frontier graphs of various United States classifications, industries, and sectors over a variety of time periods.

Gold is extremely volatile and still doesn’t do much more than vaguely keep up with inflation. You can do better.

Diversification means always having something to complain about. Recently, it has been energy.

Diversification among many different countries provides a more consistent return than investing entirely in the United States.

In reality, all three “myths” are cause for real concern about SRI, ESG, and other so-called impact investing.

Keeping $100,000 might cost you $500,000 in lost opportunity costs over 20 years.

Generally speaking, Value stocks outperform Growth stocks. Investing based upon this finding is called “Value Investing.”

Our intention in including this particular slide is to show the range of quarterly returns. Here is some wisdom on how to use this slide when comparing your own returns for the quarter.

Dimensional’s analysis found that top funds do not repeat.

Asset classes are best defined by looking at the correlation of their returns. These four 2015 articles take a close examination at the three appreciation asset classes.

We continue to believe that diversification among many different countries provides a more consistent return than investing entirely in the United States.

An analysis of changing to lower cost funds.

Some performance is cause for concern. Other times, you need not worry. Here are 5 times you should not worry and 4 cases when you should.

You are allowed to deduct “up to 20 percent of their combined qualified real estate investment trust (REIT) dividends,” and this deduction is unlimited. So it begs the question: Is there a way I can deduct my normal real estate income?

For all of these reasons, our recommended investment strategy does not focus on dividend-paying stocks.

A blended portfolio can perform better even as some of its components under perform due to the rebalancing bonus.

Bonds are like the iron rods put in the bottom of sailing ships. They don’t make the ship go faster, but they do keep the ship from capsizing in stormy weather.

“Think of a stock as a machine that generates cash every few months.” Smaller companies that you have never heard of usually have a better return than the better known larger companies.

Although volatility is often unwelcome by investors, it can provide profitable returns.

2017 was such a good year for the stock markets that it set a record.

Even very volatile investments may, in moderate amounts, reduce a portfolio’s volatility if the investment is not correlated with the rest of the portfolio’s components.

On January 9, 2018, David John Marotta appeared on Radio 1070 WINA’s Schilling Show to discuss ten investment categories that look more attractive than the S&P 500 at the start of 2018.

My understanding is that being the custodian of your own IRA assets is illegal. Also, we believe that investing your IRA in gold is not a good idea even if you have a third party custodian.

Under weighting Canada could have the effect of diminishing your returns. If your fund under weights Canada, consider switching to a lower cost fund which properly represents it.

Exchange Traded Funds (ETFs) have at least a dozen significant benefits over mutual funds and only a few disadvantages.

Gold advocates will often go to great lengths to tout the advantages of owning gold.

Why do our portfolios systematically overweight healthcare stocks?

Energy’s low correlation with nearly every other major asset class means even very conservative investors should consider over-weighting Energy stocks.