All About Asset Allocation, Second Edition - Softcover

Ferri, Richard A. A.

Softcover

ISBN 10: 0071700781 ISBN 13: 9780071700788

Verlag: McGraw-Hill Education, 2010

Inhaltsangabe

WHEN IT COMES TO INVESTING FOR YOUR FUTURE, THERE'S ONLY ONE SURE BET—ASSET ALLOCATION

THE EASY WAY TO GET STARTED
Everything You Need to Know About How To:

• Implement a smart asset allocation strategy
• Diversify your investments with stocks, bonds,real estate, and other classes
• Change your allocation and lock in gains

Trying to outwit the market is a bad gamble. If you're serious about investing for the long run, you have to take a no-nonsense, businesslike approach to your portfolio. In addition to covering all the basics, this new edition of All About Asset Allocation includes timely advice on:

• Learning which investments work well together and why
• Selecting the right mutual funds and ETFs
• Creating an asset allocation that’s right for your needs
• Knowing how and when to change an allocation
• Understanding target-date mutual funds

"All About Asset Allocation offers advice that is both prudent and practical--keep it simple, diversify, and, above all, keep your expenses low--from an author who both knows how vital asset allocation is to investment success and, most important, works with real people." -- John C. Bogle, founder and former CEO, The Vanguard Group

"With All About Asset Allocation at your side, you'll be executing a sound investment plan, using the best materials and wearing the best safety rope that money can buy." -- William Bernstein, founder and author, The Intelligent Asset Allocator

Über diesen Titel

Über die Autorin bzw. den Autor

McGraw-Hill authors represent the leading experts in their fields and are dedicated to improving the lives, careers, and interests of readers worldwide

Auszug. © Genehmigter Nachdruck. Alle Rechte vorbehalten.

All About ASSET ALLOCATION

By RICHARD A. FERRI

McGraw-Hill

Copyright © 2010 The McGraw-Hill Companies, Inc.
All right reserved.
ISBN: 978-0-07-170078-8

Contents

Chapter One

Planning for Investment Success

KEY CONCEPTS

• Investment planning is critical to long-term success.

• Asset allocation is the key element of investment planning.

• Discipline and commitment to a strategy are needed.

• There are no shortcuts to achieving financial security.

A successful lifelong investment experience hinges on three critical steps: the development of a prudent investment plan, the full implementation of that plan, and the discipline to maintain the plan in good times and bad. If you create a good plan and follow it, your probability of financial freedom increases exponentially.

An investment plan provides the road map to fair and equitable investment results over the long term. Your asset allocation decision is the most important step in investment planning. This is the amount of money you commit to each of various asset classes, such as stocks, bonds, real estate, and cash. It is your asset allocation that largely determines the growth path of your money and level of portfolio risk in the long run. Exactly how you invest in each of these asset classes is of lesser importance than owning the asset classes themselves, although some ways are better and less expensive than others.

What is you current investment policy? Consider the following two portfolio management strategies. Which one best describes you today?

• Plan A. Buy investments that I expect will perform well over the next few years. If an investment performs poorly or the prospects change, switch to another investment or go to cash and wait for a better opportunity.

• Plan B. Buy and hold different types of investments in a diversified portfolio regardless of their near-term prospects. If an investment performs poorly, buy more of that investment to put my portfolio back in balance.

If you are like most investors, Plan A looks familiar. People tend to put their money into investments that they believe will lead to profitable results in the near term and sell those that do not perform. The goal of Plan A is to "do well," which is not a quantifiable financial goal. What does "do well" mean? Plan A provides no guidelines for what to buy or when to buy it, or when to sell because of poor performance or changing prospects. Academic research shows that people who trade their accounts based on near-term performance tend to sell investments that eventually perform better than the new investment they buy.

I have talked with thousands of individual investors about their portfolios over the years. It is interesting to ask people what their investment plan has been and if their returns have met their expectations. Most people will say that they have some type of invest plan, and they will say that their performance is generally in line with the markets, but both these statements are wishful thinking. An analysis of their portfolio often shows little evidence that any plan actually exists or has ever existed and that their investment performance tends to be several percentage points below what they guessed it might have been. The sad truth is that a majority of investors choose their stocks, bonds, and mutual funds randomly with little consideration for how they all fit together or the amount they pay in fees, commissions, and other expenses.

CHARACTERISTICS OF A PLAN

Successful investing is a three-step process: (1) plan creation, (2) implementation, and (3) maintenance. It is an important step forward for people to recognize that they need a good investment plan and good investments in the plan to meet their long-term financial objectives. Once people come to that realization, they need a method for creating their plan, which is where this book comes in. Second, then they need to implement the plan, because a good plan not implemented is no plan at all. Finally and most important is a process for maintaining the plan, because discipline drives long-term results.

A good plan has long legs and should last several years without major modifications. Annual reviews and adjustments are appropriate, with major changes occurring when something has changed in your life. Adjustments to plans should never be made in reaction to poor market conditions or be based on a comment some talking head made on television. You would not quit your job and change occupations because you are going through a slump nor should you change your investment plan because your portfolio is suffering in a bear market. These off periods are natural and expected, and you must learn to live with them.

Put your investment plan in writing, because a written plan is not soon forgotten. Your investment policy statement (IPS) should include your financial needs, investment goals, asset allocation, description of investment choices, and why you believe this plan should get you to your goals over time. I guarantee that you will not be making many snap investment decisions if you have the discipline to read your IPS before you make any change. All the planning in the world will not help if a plan is not implemented and religiously maintained. Most investment plans never become fully implemented because of a host of excuses including procrastination, distractions, laziness, lack of commitment, and the never-ending search for a perfect plan. I estimate that less than 50 percent of investment plans written are actually fully put into place. But that is not the whole story. Regular maintenance is the key to success following plan implementation. Markets are dynamic, and so is your portfolio. Periodic maintenance is needed to ensure that a portfolio is kept in line with the plan.

It is likely that less than 10 percent of all investment plans are fully implemented and maintained long enough and with enough discipline to make them work efficiently. Perhaps you may think I am being pessimistic, but that is what I have witnessed in my many years in the investment business. Many great investment plans fall by the wayside each year. There are a lot of good intentions out there, but there is much more procrastination.

THERE ARE NO SHORTCUTS

Money and life are intertwined in our culture. Our financial well-being is always on our minds. Will we have enough money? Will our children have enough for college? Is my income secure? What will happen to Social Security? Will I be able to afford health care? Are taxes going up? Will I be able to sell my house at the price I want when that time comes? Will I have to borrow money? What is my credit score? Most working people struggle to cover their living expenses let alone save enough for future obligations including retirement. They question when or whether they will be able to retire, and if they do retire, whether they will have a lifestyle that makes them comfortable. In the final years of life, decisions must be made about who gets our unspent money, how they get the money, and who is going to execute our estate. Money management is a never-ending battle from the time we get our first paycheck until we end our stay on this great planet.

Money matters are stressful, and investment decisions are part of that stress. When we save a little money, we don't want to lose it by investing poorly. Yet we do want a respectable rate of return. The earlier in life a person learns to invest money, the better off that person will be both financially and emotionally.

...

Details zur Ausgabe

• Verlag: McGraw-Hill Education
• Erscheinungsdatum: 2010
• Sprache: Englisch
• ISBN 10: 0071700781
• ISBN 13: 9780071700788
• Einband: Taschenbuch
• Auflage: 2
• Anzahl der Seiten: 352
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: gpsr@libri.de; gpsr@libri.de; ; Friedensallee 273; Hamburg; 22763; Deutschland