Tag Archives: Jason Zweig

Sequence Risk Lurks for “Buy on the Dip” Investors

Generally accepted investing wisdom has always called for long-term investors to “buy the dips” and add to their positions as the market declines.  This advice makes sense in most cases, but as the WSJ’s Jason Zweig points out, the “buy the dips” refrain needs to be thought about in the context of an investor’s time horizon and how market returns occur. For younger investors, by the dips can be a very sound philosophy, but for older investors close to retirement, the exact opposite is often true. Zweig explains that “sequence risk”, which refers to the order in which stocks produce good and bad returns, is a very important factor in determining whether buying during market declines is an appropriate approach. For example, according to Zweig, “a 30-year period in which the stock market drops at the beginning and rises toward the end can have the identical average annual rate of return as a three-decade period in which stocks rise at the beginning and fall at the end. But the results will be drastically different.” Zweig highlights a few ways investors near or in retirement can try to eliminate sequence risk, including:

  • Buy value stocks during periods of market overvaluation – Zweig’s article highlights research from GMO supporting this idea.
  • Hold a high level of cash on hand or defer social security – This provides a cushion to help absorb market declines
  • Purchase single-premium income annuities – These could work for some, but may not in many cases due to their cost and financial advisors lack of familiarity with them.
  • Draw from home equity during market declines – The government’s home equity conversion program allows for borrowing at competitive rates to raise cash and avoid selling stocks during market declines.

Zweig’s overall point is that staying prudent and understanding the risks of stocks is one of the best ways to try and combat sequence risk. In the end, Zweig says that “the advice to buy more stocks every time they drop probably doesn’t apply” to those who are nearing or in retirement.

What Makes Buffett So Good

Just what can individual investors learn from Warren Buffett’s incredibly successful career? In a recent column, The Wall Street Journal’s Jason Zweig takes a look at that question.
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Tech Bubble Lessons For Today’s Investors

After 15 years, the Nasdaq Composite Index recently eclipsed its March 2000 record high. But The Wall Street Journal’s Jason Zweig says that before they get too excited, investors would be wise to remember the lessons of the Nasdaq’s decade-and-a-half of struggle to regain its high.
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Ben Graham, Index Fund Fan?

Would Benjamin Graham, the man known as “the father of value investing” and a pioneer in security analysis, have liked plain, generic index funds? In a recent column, Jason Zweig, who edited an updated edition of Graham’s classic book The Intelligent Investor, says yes.
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Lessons from 2014’s Forecasting Failure

What lessons can investors take from 2014? Don’t listen to short-term economic and stock market forecasts, says The wall street journal’s Jason Zweig.

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Your Brain And Your Risk Tolerance

How much risk can you handle in your investment portfolio? In a recent Wall Street Journal column, Jason Zweig looked at how to answer that question — and how brain science can offer some clues.
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Munger On Buffett, Temperament, And Why He’s Better Than Ben Graham

Charlie Munger isn’t nearly as high-profile as his Berkshire Hathaway partner Warren Buffett, but The Wall Street Journal’s Jason Zweig recently caught up with him for a fascinating interview in which Munger talked about everything from Socrates and Confucius to derivatives and accounting practices to why he doesn’t love Benjamin Graham the way Buffett does. Read more

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