Investments

Private Equity Fund Performance

Research from Bain & Co. found 75% of all private equity funds could “legitimately be ‘top quartile’ performers, depending on the type of data used for comparison” (source: WSJ, August 4, 2014). Services such as Preqin, Thomson Reuters, and Cambridge Associates LLC are considered to be objective sources for accurately reporting private equity performance. Professor Korteweg at USC believes high private equity returns are due to mostly luck and some skill.

 

Some Portfolios May Be Too Diversified

Is a U.S. stock/bond mix sufficient for most people to reach their retirement goals? Morningstar has addressed this question by creating seven portfolios, each more diversified than the previous one. Returns for the 20-year period ending June 2014 are shown in the table below. It turns out a simple 70/30 mix (S&P 500 + government bonds) is difficult to beat. Each of the seven portfolios was rebalanced at the end of each calendar year.

 

Portfolio Annualized Returns [all periods ending 6/30/2014]

 

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Dividend-Paying Stocks

TIPS

As of June 2014, the TIPS marketplace was valued at just under $1 trillion, representing ~ 8% of the Treasury debt market. TIPS represent the only marketable U.S. debt instrument with an inflation hedgeprices are adjusted twice a year to account for CPI increases.

 

Age 50 to 70 ½

Starting at age 50, there are a number of perks available to investors:

Age 50 and older: Catch-up contributions

For 2014, 401(k) and 403(b) contributors can add up to an additional $5,500 per year. IRA contributors can add an additional $1,000 annually.

Age 55+: Penalty-free withdrawals from employer plan

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Lagging Performance

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Stock Dividends

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Age 50 to 70 ½

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