Tag Archives | returns

Why you may get different numbers -The Mathematics of Investing.

The imbedded report is a handy reference for those who want to calculate their own investment metrics such as yield and annual return. However, I must state … with important caveats. I would caution that calculating your own returns is fraught with miscalculations and misinterpretations! For example this article “Understanding the Link Between Volatility and Compound Returns” […]

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Why may a person’s return calculation be wrong?

People often get the calculation for their investment rate of returns wrong. Most people use the average rate of return which completely ignores the time value of money. The average rate of return may over, or under, state actual returns and are not suitable for comparisons with other investments. Most investments people have receive money at various […]

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FPA Perspectives

Retirement savers: What matters more, investment performance or your savings rate?

It may not come as a surprise that higher contribution rates lead to greater wealth accumulation for retirement plan participants. But a recent study found that the size of the difference a few percentage points can make over time is dramatic. A study by the Putnam Institute, “Defined Contribution Plans: Missing the forest for the […]

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Uncle Sam IRS

Mutual Funds and Capital Gains = tax confusion!

Many people get confused when they invest in mutual funds, either indexed or actively managed, when they haven’t sold any of their shares, yet they get a 1099 that says they have Capital Gains* and their tax preparer says they owe taxes on those gains. How does that happen? For clarity, this comes from investments that are […]

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William Bernstein on Deep Risk, Shallow Risk, and Investing for the Long-Term

What are the many kinds of investment risks? Most people think of the risk of losing their money. William Bernstein dissects this simple view into many different shades of risk and astutely discusses that not all risks are of equal possibility. So while some may worry about a certain risk, they should also consider how […]

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Smart Investors Keep It Simple-Kiplinger

What are some simple rules for investors? Dr Meir Statman provides some insights in this interview with Anne Kates Smith: Smart Investors Keep It Simple-Kiplinger. Diversity Don’t try to beat the market Save regularly You don’t need many rules. What trips us up? Emotions! Thinking errors we make as humans: Hindsight … “When people look […]

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Long Term Savings, Relying On Returns, And Retirement Date Risk – Kitces | Nerd’s Eye View

Kitces blog (Long Term Savings, Relying On Returns, And Retirement Date Risk – Kitces | Nerd’s Eye View) makes the excellent point that the traditional method of investment planning (save an amount and rely on compounding to work its magic) has some, heretofore unrecognized risks. Mainly it relies on the compounding magic to work in the […]

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tax calc

Which is better? Contributions or investment growth?

Most people rely on growth of their investments to reach their savings goal. But … it depends on how old you are to make that work. Why? Because, compounding doesn’t really kick in until the later years. When you are older (than 45), you don’t have those “later” years anymore. True, what you have saved […]

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open egg

Contributions or Returns? Which is Better?

“Any investment portfolio has two engines of growth: the contributions made by the investor, and the rate of return generated by the portfolio. But which has the greater impact?” says Dr Craig Israelsen in Financial Planning article titled “Best Way to Bulk Up.” His findings echo those of mine that I posted in a blog […]

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“Why evolution has made us bad investors”

We evolved looking for patterns to survive. But the modern brain doesn’t distinguish between patterns and simple random stuff. By SensibleInvesting.tv* : “Financial author and theorist William Bernstein on why humans just aren’t cut out to be good investors. Our emotions and instincts are invaluable if we are faced with a fierce tiger, but not […]

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