This article provides a list of recommended reading from among the many hundreds of articles that I have authored in the past several years. Note that I have personally written all the content that you will find on the six personal finance and investment websites referenced below. You can reach us by using the contact form below.

Enjoy!

The Skilled Investor website

Note that you can find all of my other financial websites, by going to The Skilled Investor website and clicking on the red colored links in the left hand column on any page of The Skilled Investor website.

On the front page of The Skilled Investor website you will find an index of pages with major categories and subcategories. Within the subcategories there are lists of articles and the front page tells you how many articles are in any subcategory. There are many articles in addition to those listed below, which you can find by clicking on the subcategory links below that have arrows in front of them.

Here are some suggested personal financial planning and investment management articles within the major categories and subcategories. Article titles are descriptive and should help you decide which articles you want to read first.

Personal Investment Management

• You must stay invested in the securities markets to earn market risk premiums
• Commodity futures in your investment portfolio — Is there really any future for individual investors?

• Excessive investment costs are a huge problem for individual investors

• How much do hidden mutual fund trading expenses cost you?

• Is it worth paying higher bond mutual fund management fees?

• Pay less to get more (Part 1 of 2)

• The heavy burden of recurring investment fees (Part 1 of 2)

• Understanding one-time investment fees, such as sales loads

• What is the cost to individual investors of sub-optimal portfolio diversification?

• Why is diversification valuable to individual investors?

• Can a limited number of stocks provide complete portfolio diversification?

• How many mutual funds are needed for a well-diversified portfolio? – Commentary

• Chance creates the illusion that investors can beat the stock market

• The illusion of superior professional investment manager performance

• Distinguishing between true investment skill and luck

• What have average investment asset class risk premiums been over long periods?

• Asset class investment risk premiums — your reward for taking investment risk

• How stable have common stock market returns been over time?

• How are asset class risk premiums and the risk free rate of return related?

• How do return expectations of investors compare to historical stock returns and risk premiums?

• Calculating your investment wage and the opportunity cost of your time

• The value and opportunity cost of your investment time

• Passive Personal Investment Strategies are More Time Efficient with Better Returns and Risk Control

• 15 Value-Added Individual Investor Activities

• What else should you read about investing?

• A caution related to classic investment books

• How can individual investors trust, when so much investment information is rubbish?

• How investment securities are valued — snapshots in time

• Introduction to investment valuation and securities risk

• The confusing investment securities market motion picture

• What is efficient market pricing in the securities markets?

Personal Financial Planning

This is a must shortened list of available articles, because there are many other personal financial planning articles posted on The Pasadena Financial Planner website. See a selected list below.

• The Problem — Straight answers about personal financial and investment planning are difficult to find

• The Solution – Only follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient

• Traditional versus Roth tax-advantaged plan contributions

• Factors that tend to favor Roth tax-advantaged plan contributions (Part 1 of 2)

• Summary Table of Traditional IRA and Roth IRA Tax Rules

• Executive Summary of VeriPlan

• VeriPlan’s 10 Financial Planning Tools and Financial Calculators

Financial Advisors, Investment Counselors, and the Financial Industry

Are Your Best Interests the Same as the Financial Services Industry?

• Financial science drives industry product development, but not necessarily toward the best interests of individuals

• The investment industry is not your investment partner

• How to lie with statistics: Investment performance charts (Part 1 of 2)

• Many individual investors are not fooled by an ethically challenged securities industry

• The securities industry calls marketing and selling – “advising”

Payment of Investment Advisors, Financial Planners, and Investment Counselors

• The economics of the financial advisory industry

• Does it matter how financial planners and investment advisors are paid?

• Can you really get free and objective investment advice, when you pay investment sales loads? (Part 1 of 2)

• How expensive is advisor compensation paid via sales loads?

Selecting a Financial Planning Advisor or Investment Adviser

• Preparing to interview a financial planner or investment advisor

• Questions to ask when hiring an investment advisor – Part 1 – Background and training

Regulation of Financial Advisors and Investment Advisers

• Regulation of financial planners and investment advisors — Introduction

Frauds and Scams by Financial and Investment Advisers

• Avoiding financial planning and investment advisor frauds and scams – Overview

• Avoiding financial advisor frauds and scams – The Never-do list — Part 1

Best No Load Funds website

Click “Sitemap” in top banner for a list of articles. Suggested reading:

• 7 Ways to Pick the Best Noload Mutual Funds and ETFs

To find articles that focus on each of these seven selection criteria, either click on the numbered headings within this article or go to the Sitemap.

No Load Bond Funds website

Click “Sitemap” in top banner for a list of articles. Suggested reading:

• No Load Bond Funds
• The Top 14 Low Cost Taxable United States Bond Mutual Funds (Low Minimum Deposit)

The Skilled Investor Blog

(associated with The Skilled Investor website)

You could read these selected articles:

• Where’s Waldo? – The illusion of superior professional mutual fund manager performance.
• Why only one Warren Buffett? The illusion of superior professional mutual fund manager performance.

Low Cost S&P 500 Index Funds website

You could read these selected articles:

• Top 10 S&P 500 Index Funds
• Buy an S&P 500 Index Fund with Low Costs

The Pasadena Financial Planner website

Click “Sitemap” in top banner for a list of articles.

Suggested reading:

• Your Family Financial Planning
• Your Family Financial Planning Process

The two articles above summarize “10 Financial Planning Steps in the Right Direction,” a recommended personal financial planning process. There are individual articles with more details about each of these 10 steps. You can find them by clicking on the bold section headers within the two articles above, or you can find them by clicking the “Sitemap” link on any page and looking for the articles that are numbered 1 through 10.

In addition to these financial planning process articles, read:

• Living Expense Tracking Methods
• Asset Allocation, Investment Asset Tax Location, and Emergency Cash Management

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See: Fee Based Pasadena Investment Advisor >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Regarding compensation, I provide financial planning services only on a fixed fee or hourly fee for services basis, and solely under a contract that we agree upon. I do not charge any form of asset fee. In addition, to avoid all conflicts-of-interest, I do not accept commissions or compensation of any type from the financial industry.)

Start a conversation today — Send a message using this contact form

Financial Planning Pasadena CA

Use the top fee only financial advisor — helping clients in Southern California, including Altadena, Tujunga, Walnut, West Covina, La Canada, West Hollywood, West Los Angeles, West Toluca Lake, and Pasadena.

This is one of the “10 Steps in the Right Direction” that make up The Pasadena Financial Planner’s personal financial planning and personal investment management process. For a summary of these ten steps, see “Your Family Financial Planning.” To find an in depth article for each step, just click the Pasadena Financial Planners Sitemap link at the top of this page. You can reach us by using the contact form below. Please enjoy reading this article. Thank you!

Investment diversification is a genuine financial “free lunch.” Diversified investment funds are key contributors to optimal investment risk management.

Diversification has become an axiom of personal investing, because the specific risks of businesses and other investment entities can be reduced or eliminated from a portfolio without reducing expected returns. When you hear that you should diversify your investments, this means that you should diversify your investments completely and globally – now and always. The investment research literature repeatedly demonstrates that a fully diversified, low cost investment strategy is superior. Get diversified. Stay diversified. Be globally and fully diversified all of your life.

Post-Credit Crisis Commentary Concerning:

Diversified Investments

NOTE: Best personal investment and financial planning practices are durable and wouldn’t change because of market cycles. The article below was written years ago and doesn’t need to be revised. In light of the more recent financial market crisis, the additional comments in this colored box were published recently to emphasize the durable wisdom contained in the detailed article below.

The best investment strategy is to seek complete market diversification at the lowest investment cost using passively managed and globally diversified index mutual funds. You can reduce the volatility of your personal portfolio significantly and track the return of the market with relatively small investment costs. Other strategies tend of be sub-optimal, involving greater portfolio volatility and risk — and accompanied by higher costs in term of expenses, taxes, time commitment, and stomach acid.

Nothing that has happened in the credit crisis changes the value of broad market diversification. Some uninformed post-crisis commentary has questioned the wisdom of diversification, which only indicates a failure to understand what diversification can and cannot do for you. Diversification across a portfolio can and does mitigate volatility over time. However, when systemic factors across asset classes are in motion in the securities markets, then there is nowhere to hide, as occurred with the credit crisis. As over-leveraged investors (AKA speculators) across a variety of asset classes scrambled for liquidity, selling pressure increased broadly and asset values crashed generally, albeit, not uniformly. Those who were very broadly diversified felt less pain, but still felt pain.

However, if you really like the potential for a lot more pain, then don’t diversify. Sooner or later, that pain is much more likely to come to an ill-diversified investor’s portfolio compared to the porfolio of a broadly diversified investor.

Of course, ill-diversified investors chasing tactical and active strategies are always hoping for outsized returns for the added risk. Sadly, only a minority of active investors will get lucky, and it is largely luck (of the lack thereof) that is at play here. The percent of the lucky minority achieving excess returns tends to diminish with time — as excessive fees and taxes eat away at illusory excess returns — proving the foolishness of active strategies.

Article continues:

Diversification is really not an option, if your goal is optimized, risk-adjusted personal investing. Diversification is not an optional part of family investment strategy, if that family wants to sleep well at night. When you are less than fully diversified, every day that you wait exposes you to investment risks that the securities markets tend NOT to compensate through better returns. When you are less than fully diversified, your investment portfolio risks are higher than they need to be without a reasonable expectation of getting any likely additional returns.

When you chose an active management strategy versus a passive one, try to time the markets versus staying put, buy individual securities versus funds, favor certain economic sectors versus full domestic and international diversification, etc., then you are much more likely to lose than to win. This is simply because the road you are taking is unnecessarily rough and unnecessarily winding, and you have less certainty that you will reach your goals. You might overshoot in performance if you are lucky, but you are much more likely to under-perform, because of the various higher expenses and costs that continually drag down active strategies. The longer your time horizon the greater the chances that you will fall behind a passive, lowest cost, market investment strategy.

A passive strategy targets a market return and can still be a bumpy ride — especially if you are not fully diversified globally and you have not adopted an asset allocation that is appropriate to your tolerance for investment risk. Nevertheless, the attendant risks are lower and potential variations are narrower than active strategies. Furthermore, passive strategies that drive down investment costs and expenses to the bare minimum are not continually burdened by repeatedly having to pay the financial services industry a much larger and undeserved share of your returns. It is hard enough to finish a marathon without carrying water for the financial securities industry at the same time.

Full global investment diversification using the broadest, cheapest, most passive index mutual funds and exchange traded funds (ETFs) is the most optimal strategy for the individual investor.

Few in the industry will tell you this, because a lowest cost, global, and passive diversification strategy is the least profitable to the financial services industry. The securities industry looks upon you as a naive “retail investor.” The industry trains its representatives to sell to you the most profitable products that it can at “retail” prices.

Through visible and hidden fees and other costs, these “retail” prices are heavily marked up to compensate the industry and its very highly paid sales force. Who do you think is paying for all those tall buildings, brass fittings, mahogany tables, woolen suits, and expensive silk ties? Who pays the industry’s huge salaries and bonuses? Does the money just come out of thin air, or does it come out of your investment assets and your investment returns?

Few will tell you this fundamental truth about the superiority of cheap, passive, fully diversified broad market investing. Everyone in the industry gets paid somehow, and there is far less profit in promoting a low cost, fully diversified investment strategy. However, there is real money in it for you. In the long run, you will tend to save more money, to save more time, and to save yourself from emotional consternation, when you use a very low cost, fully diversified passive investment strategy.

Complete investment diversification has become an axiom of personal investing, because the specific risks of businesses and other investment entities can be reduced or eliminated with a fully diversified portfolio without reducing your expected returns.

A fully diversified portfolio is an absolute investment necessity. Increased diversification reduces portfolio risk without a corresponding reduction in expected portfolio returns. Diversification is genuinely an investment “free lunch,” and it is a key contributor to improved investment risk management. A very high degree of diversification can be achieved through investing in a variety of low cost passively managed index mutual funds or exchange-traded funds. Such investments are also among the lowest cost investment vehicles available to individual investors in the financial markets. Given that this alternative is easily and cheaply available, the relevant question is never whether a portfolio should be fully diversified.

Through investments in broad-based index mutual funds and exchange-traded funds, diversification is relatively easy and inexpensive to achieve. Attempting to become broadly diversified through the self-assembly of a portfolio of a large number of individual securities is far more difficult and much more costly.

Portfolio self-assembly is much more likely to result in higher risk with returns that lag the market. Buying individual stocks and bonds instead of diversified funds provides you with no advantage whatsoever. The industry likes it, because individual securities trading generates fees and keeps the charade of beating the market going. However, when you buy individual stocks and bonds, you are less than fully diversified, and you are exposed to more risk. Plus, you also get to waste your money and time for nothing. Pay more and get less. What kind of value added is that? You are better off ignoring that kind of investment counseling and financial advice.

Also, see these articles for more about the value of diversification: “The value of diversification to individual investors” and “What is the cost to individual investors of sub-optimal portfolio diversification?” These articles are published on The Skilled Investor, and they report on important investment research studies on asset diversification. Note that The Skilled Investor is one of our sister publications, and it is the longest running of our family of websites.

A significant portion of a investment portfolio may sometimes become concentrated in a single investment security, which dramatically increases the overall risk of a personal investment portfolio.

While generally undesirable, there sometimes are unavoidable reasons for investment concentration. Unavoidable reasons for lack of diversification can include owning a private business or being a key member of a company management team who is required to own company stock by an employment agreement with the company. In such circumstances, you should seek expert guidance on possible ways to mitigate the risk associated with your concentrated investment position.

Nevertheless, for 99.9+% of investors, there is absolutely no good reason to maintain a high level of concentration in an individual security. Immediate steps should be taken to reduce the exposure. How many failed public companies like Enron and WorldCom do investors need to see crash and burn, before they realize that excessive concentration does not pay and can lead to very significant personal financial peril?

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See: Investment Advisors in Pasadena California >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Concerning compensation, I provide financial planning services only on a hourly fee or fixed fee for service basis, under a contract that we agree upon. You do not have to pay any asset fees. In addition, to avoid all conflicts-of-interest, I never accept compensation or commissions of any kind from the financial industry.)

Start a conversation today — Send a message using this contact form

Pasadena Financial Planners

The best fee only investment advisor for clients in the Pasadena area, including these towns South Pasadena, South San Gabriel, Studio City, Sun Valley, Sunland, Tujunga, and Pasadena.