Life cycle theory is one of the more exciting and useful areas of research in personal finance. In broad terms, it represents the body of economic theory and knowledge that examines how individuals can make wiser and more beneficial decisions about spending, saving, investing and insuring over their lifetimes. There are several concepts underlying life …
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In Part 1, we talked about how the increase in life expectancy presents a significant financial challenge for most retirees. In simple terms, the longer we expect to live, the more money it will cost to fund our retirement. The evidence suggests that most Americans are not are prepared to meet this challenge. Governments and …
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A long, healthy life is a blessing. The good news: Americans are living longer than ever before. Life expectancy has increased dramatically in the last few decades as a result of major advances in science, technology, and medicine. An individual’s life expectancy is his or her median lifespan. In the United States, the life expectancy …
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In order to make smart financial decisions including how to invest and how much to spend today and save for tomorrow, investors need to develop average long-run return projections for stocks and bonds. However, the misapplication of the term “average” has caused substantial damage to the nest eggs of American workers and retirees. Average returns …
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A major concern of investors worldwide is the expectation for low returns for the foreseeable future. The consensus among economists, academics and other investment experts is that today’s low interest rate environment does not bode well for either future bond or stock returns. Furthermore, based on these same estimates, it appears unlikely that this situation …
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Even after two steep stock market declines in the last 14 years, baby boomers who are now retiring in droves have grown accustomed to earning strong returns on their savings and investments. Over the last 30 years, the stock and bond markets returned roughly 10% and 6% respectively before inflation and about 7% and 3% …
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The Reality of Lower Investment Returns

December 20th, 2014 | Posted by Sentry Financial Planning in Investment Planning - (Comments Off)

Despite two major market declines in the last 15 years, the U.S. financial markets have been generous to investors, and baby boomers have been perhaps the biggest beneficiaries. Over the 30-year period from 1980 through 2013 the stock and bond markets returned roughly 10% and 6% respectively before inflation and about 7% and 3% after …
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Well-designed investment plans are simple, not complicated. Each investment complements the others and contributes positively to the portfolio’s performance. In simple terms, when an asset is added, it should either reduce the risk or improve the after-tax return. Unfortunately many investors make decisions ad-hoc, based on recommendations from the media and suggestions from others, without …
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How investors beat themselves

November 20th, 2014 | Posted by Sentry Financial Planning in Investment Planning - (Comments Off)

“Surprise! The returns reported by mutual funds are not actually earned by mutual fund investors.” This is how John Bogle, founder of Vanguard Mutual Funds begins the chapter titled The Grand Illusion in his 2007 book, The Little Book of Common Sense Investing. The “grand illusion” Mr. Bogle is referring to is the fact that …
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In our last blog post we introduced the concept of behavioral finance. This relatively new field has been attracting the attention of mainstream investors over the last twenty years. Behavioral finance is the area of economics that studies how the financial decisions we make are influenced by factors beyond a purely logical analysis of the …
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