Throughout the week, I run across articles written by other people that may be of interest to you. This week, there are two articles I’d like to highlight.
Some of you know that I played tennis in college, so this first article from Dan Solin really caught my attention. The title of the article is If Only I Could Take a Set From Roger Federer. In most things in life, amateurs don’t stand a chance against pros. But Dan correctly points out that this is not the case when it comes to investing. The so-called pros are paid lots of money to predict the direction of the market, avoid down markets, perfectly time up markets, find the next Google or Apple, etc. Many of you know that we utilize Dimensional Fund Advisors’ (DFA) mutual funds for the very reason that they DON’T attempt to make these predictive claims. And in this article Dan references a study that shows two very large “predictive type companies” who have underperformed DFA every year over the last 17 years.
The second article is from Fox 2 News titled Illinois Lottery Suspends Powerball, Mega Millions Amid Budget Crisis. You may be wondering how the lottery ties in to financial planning and investing. But before your mind wanders too much, let me point out that the lottery is not an effective investment strategy. However, this article does highlight two very important investing principles – “don’t put all your eggs in one basket” and “don’t let tax savings take priority over proper investment strategy”. Many people, especially wealthy people, have the idea that investing in municipal bonds is a great strategy because it avoids federal tax and in some cases, state tax, if it’s a municipal bond issued in your resident state. You don’t have to look too far for states that are experiencing financial trouble. It’s just not worth it to put a large chunk of your money into one state. If you are going to invest in muni-bonds please minimize your risk by spreading your money across the nation. But also recognize that it’s probably not wise to own “just” muni-bonds either as you should spread out your risk by owning other types of bonds as well.
Hope you enjoy!
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