By: Larry Swedroe
Over the past few decades, there has been a substantial shift from active to passive investment strategies. This shift has occurred as investors have become more aware of the persistent failure of active management, as demonstrated in the S&P Dow Jones biannual Indices Versus Active (SPIVA) reports.
A January 2019 Federal Reserve Bank of Boston study, “The Shift from Active to Passive Investing: Potential Risks to Financial Stability?”, found that “Passive funds made up 45% of the assets under management (AUM) in equity funds and 26% for bond funds at the end of 2017, whereas both shares were less than 5% in 2005.”
Wall Street has been attacking and ridiculing passive investing for decades. Among the arguments are that the rise of passive investing results in a reduction in price discovery efforts, leading to prices being distorted and capital allocated inefficiently. This occurs because indexing either has too large an influence on prices or it inhibits price discovery because it lowers aggregate market trading volume.
Investment opportunities exist all around the globe.
Across more than 40 countries, there are over 15,000 publicly traded companies. 1 If you listen to the news, however, some countries may seem like better places to invest than others based on how their economies and stock markets are doing at the time. Fluctuations in performance from year to year only add to the complexity, providing little useful information about future returns. Daunted by the prospects of sorting it out, some investors look to the place they know best—their home market. There can be good reasons, such as tax benefits, for prioritizing an investment close to home, but too much home bias could mean underweighting or missing out on part of the investment universe.
By: Richard W. Johnson
Many people dream of leaving the office as soon as they can. But the evidence suggests a lot of downsides. It may be time to rethink those dreams.
Most people look forward to retirement, a reward for decades of hard work. But like many other pleasures, it may be bad for your health. It may even kill you. How can that be? How can working longer be good for your health? After all, many people dream of—and plan for—retiring early. Strenuous, stressful work can wear people down and damage their health.
On the other hand, retirees can relax and reinvigorate themselves. They have time to follow their passions and pursue activities that enrich their lives. But in our rush to leave the office, we don’t realize that retirement also has a downside, especially over the long term.
Everyone needs to keep certain personal financial files more or less permanently. But which files should you keep, and why do you need to keep them? How long should you keep them and in what format?
This article serves as a brief guide to organizing your personal paperwork.
In this article
- Why Keep All Those Papers?
- A Structure You Can Use
- Consider These Real-World Issues
- Roadmap for Heirs
Why Keep All Those Papers?
You need to maintain personal financial files in order to prepare for any number of contingencies. These include:
Tax Audits and Calculations: Your tax return might be audited. Tax authorities at both the federal and state levels have the right to reopen your tax return at any time if there is a suspicion of fraud. However, most audits are designed to resolve less troubling discrepancies, with various audit deadlines typically set to occur within seven years. This audit risk creates the need to keep tax and supporting documentation in general for seven years.