60/40 Balanced Portfolio in times of Zero Interest Rates

The advocates of the 60/40 balanced portfolio forget that the 40% that is invested in bonds poses a great risk for no return. Given where bond yields (if you want to call the puny returns on offer a 'yield') are the only way that bond prices will ever move to a significant extent is DOWN. That would mean losses on the bond portion of the portfolio. Much better to stay in cash (or pull out the money from the bank if ever the governments impose negative interest rates).
Vanguard defends 60/40 Portfolio

Passive Investing done the right way

Since the most recent Market Crash 2007-09 Passive Investing - mostly by using ETF's - has gained in popularity, and rightly so. But Investors should be careful not do add an additional layer of costs when they pay a commission or fee to a Financial Adviser or Fund Platform or Provider. The majority of liquid investments (i.e. listed shares in contrast to property or private equity investments) can and should be allocated to low-cost instruments. A good spread among different asset classes (bonds - high grade, high yield and emerging market bonds, government bonds, equities - large and small caps, emerging markets, international issues, currencies) is still a tricky decision to make but here the guideline should be the market cap as well as occasional rebalancing in a contra-cyclical fashion.

Index ETF: Time to say Good Bye?

More and more commentators suggest that investors should move out of passive investment vehicles, i.e. index funds, mostly packaged as ETF's. But you should resist the lure of active mnagement and instead review your asset Aalocation.

Do you know your Asset Allocation?

While picking individual stocks, currencies, bonds or even countries and sectors may be sexy most investors do not know that the decision about asset allocation (stocks/bonds/currencies/real assets) is the most important factor in achieving long-term investment success. Depending on your personal situation this holistic approach should also include real estate and interests in business, either directly or indirectly held.

Sector ETF's better than Market Index

While no advocate of market timing for the average investor I think it is preferable to keep an eye on overvalued or undervalued market sectors and allocate new money based on constant sector weightings. Index ETF's are a great - and cheap - instrument to get exposure to the Equity Market but this approach avoids money being allocated to expensive and possibly overpriced market sectors. It is perfectly possible to create a near-perfect replication of the overall market by carefully selecting sector ETF's.

2 Problems with Longterm Investment Strategy

While investors are well advised to follow an investment strategy that focuses on getting the asset allocation right in the long-term they face two major problems when executing it. Sticking to such a plan over many years, even decades, requires an amount of patience and self-discipline that most individuals lack. At the same time advisors and commentators often neglect to mention that one aspect that investors can control are costs and fees that can erode a substantial portion of investment returns. If neglected such costs can add up to an amount equal to the net gains accumulated in a portfolio over a period of 20 or 30 years.

A simple asset-allocation system

An article in the Financial Times proposes a simple-to-use asset-allocation system. But as always the devil is in the detail as it requires the investor to make quite precise estimates for the expected returns in the various asset classes. In an ideal world the investor would just pick the asset with the highest expected return. But even after taking account of this deficiency the model still is useful as it forces the investor to at least try to quantify his expectations. This discipline will protect him from being over-exposed in any asset class and help to avoid being overly optimistic or pessimistic at major turning points in the markets.

Bond Funds - are they worth the fees they charge?

You certainly do not need an investment manager to hold your assets in cash, but should you pay a fund manager to manage your bond investments? and if yes, how high should the fees be that you pay for looking after this asset class.
An interesting article reviews this problem but we would rather have the investor focus on the fact that the selection of the right asset class (cash, bonds, stocks, currencies and possibly commodities, not to mention property or direct investments) is the main driver of long-term investment success.
Tinkering with the selection of assets within each asset class is an important challenge but should always play second fiddle to the selection of the right asset mix.

Are there still any 'safe' Investments?

This question is often asked these day. And with good reason. A large part of investable assets are the debt obligation of states, regional governments, companies, private individuals and banks. While most bank deposits are guaranteed by governments that just pushes the ultimate responsibility for the repayment of bank deposits further up the chain. Only property, company shares and gold are assets that are not the liability of someone else. This explains the resilience of these assets in face of a shaky financial outlook.

Life-Cycle Funds - no Autopilot to Success

These funds allocate their assets to a mix of underlying funds based on some parameters like the age or risk tolerance of an investor.
In recent years they have become increasingly popular with pension fund investors that are enrolled in defined contribution pension schemes and want to avoid having to make their own investment decisions on a regular basis.
Lifecycle funds - or their underlying investment rationale - can be of interest to the substantial independent investor as well as any financial plan should always take the age of the investor into account.
PBA helps you to look behind the label of the product. Not all lifecycle funds are the same as their allocation to various asset classes can vary substantially from provider to provider. The allocation may at times be totally unsuitable to the needs of the investor.