blog25mar2007

Hot Off the Web
Life settlements , also discussed here in the March 7, 2007 blog, are expanded on the WSJ’s “Putting your life insurance on the block” After running through the caveats associated with life settlements, it then suggests options to consider if you no longer can afford or need the policy. Options mentioned are asking family to pay/contribute to premiums or exchange for another policy or annuity, respectively.
In the AARP Bulletin’s “Fixed for life”  immediate annuities are discussed as getting a new lease on life as insurance companies come up with (expensive?) solutions to retirees’ concerns: dying too soon, leaving an estate, inflation and need for emergency cash. Other options to consider are deferred annuities (from a low cost source like Vanguard, TIAA-CREF) and the emerging longevity insurance , an advocacy topic of this website.
Building on the concept that asset allocation (rather than timing or stock selection) is the dominant determinant of return, “The benefits of a good average”  describes how asset management firm XTF, for a cost of under 0.6%, offers ETF based portfolios for different target dates , different risk tolerances, country and sector diversification, and they also do rebalancing. (Watch for the pressure on mutual funds and their management fees to grow and the exit of even more mutual fund managers to join hedge funds with their even more expensive 2 and 20 fee structure, with the promise to deliver uncorrelated returns!?!)
In “Trickle-down investment advice”  it is shown that it takes about 20 years for academic innovations to trickle down to retail investor. Examples of innovations still not fully benefiting retail investors are: passive or index investing (including ETF implementation), benefits of cost and tax structure (as compared to institutional investor), separation of alpha (active management) and beta (passive). Surely this says that there may be gold in studying the current work of academics.
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