Archive | January, 2011

What Do You Want From Your Investments?

I recently had the opportunity to interview Meir Statman, author of the new book What Investors Really Want, and a professor of finance at Santa Clara University in California. Professor Statman is one of the world’s leading experts in behavioural finance, and his new book explores the ways that our emotions and desires affect the way we invest.

In a series of posts this week and next, I’d like to take a detailed look at some of the ideas that Prof. Statman and I discussed. At the end of the series, I’ll announce a contest where readers can win a copy of What Investors Really Want to add to their own financial library.

Let’s open with one of the main ideas that Statman introduces in the book. Why do we invest? The answer may seem obvious: to build a retirement nest egg, or a college fund for our kids, or for some other specific financial goal. But our desires go beyond these utilitarian benefits. Statman explains that we also get expressive and emotional benefits from investing. For example, active investors savour the thrill of trying to beat the market,

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Unveiling the 2011 Models

The new year is a time for change. When I first created this blog 12 months ago, I added a page of Model Portfolios almost as an afterthought. Little did I know that it would become the single most popular page on the site.

After hearing lots of feedback from investors, looking more deeply into the specific funds, and seeing the launch of new products, I decided that the Model Portfolios page needed some updating. I’ve revised some of the portfolios and added a few entirely new ones. I’ve also removed a couple that seemed redundant in this new light.

One of the main principles of Couch Potato investing is not tinkering your portfolio, so I thought it was worth describing the thinking behind these changes. None of them have anything to do with market conditions.

No more currency hedging

The original Global Couch Potato portfolio used currency hedging in its US and international equity funds. I’ve become convinced that currency hedging adds an extra layer of costs that the long-term investor does not need, especially given that hedging strategies are poorly executed by many funds. So I’m now recommending unhedged funds for this basic index portfolio.

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