Minimizing Biases

Comments on “The Major Behavioral Biases Influencing Your Investment Decisions,” by Jason Voss, in the January 2020 AAII Journal:

It would seem the article strongly supports AAII theory (that I have learned and tried to practice over the last 30+ years). Make your plan, set your portfolio diversification. Work your plan, don’t be rattled by the down swings, rebalance as required (there are strategic ways to do this with new monies vs. already invested monies to minimize the loss aversion), have the discipline to keep with and work your plan. If you find a big hole in your plan, admit that you are growing in experience and adjust your plan accordingly. Don’t stop scanning the horizon for plan improvements and adjustments. The hard part is coming up with the initial plan that you can work with, but there are lots of models and evaluation tools out here in the investing community to assist you in getting going.
—DLW from Minnesota

Although this is a well-written and informative article, it should be noted that the word “avoid” as part of the subtitle I think is miss-applied. Based on my readings, most researchers in the field of behavioral finance would argue that you can only minimize the impact of biases and not completely avoid them as inferred. The singular most powerful tool I have found in discovering and minimizing my biases’ impact is keeping a log before making any significant financial transaction.
—A. Bender from Illinois

Coin Collecting

Comments on “Mintage or Vintage: Coining Alternative Assets,” from Dispatches in the February 2020 AAII Journal:

I am valuing my childhood collection, mostly from circulation. My purpose is to have a ‘ballpark’ idea of total value before talking to dealers for possible sale. I use library books for U.S. coins and guesstimate wholesale values on a long spreadsheet, with one sheet per denomination and a row for each year.
—Al from Florida

Collecting coins is an interesting hobby. Anyone substituting this hobby for a retirement asset will get an awakening when it is time to sell.
—Andrew Allen from Oklahoma

IRA Rules in Flux

Comment on “How IRAs Contribute to Retirement Savings in the U.S,” from Dispatches in the February 2020 AAII Journal:

The SECURE Act passed in late 2019 changed the rules for inheritance of IRAs and will subject them to very high income tax rates when heirs are forced to take all the funds out within a 10-year period. They were meant to be passed on to one’s spouse, then children, grandchildren, etc. The rules were totally changed with no regard to those of us who had invested following the rules that had been in place since 1974.
—Henriettah from Kansas

Mutual Fund Reviews

Comment on “How to Choose a Mutual Fund,” by Charles Rotblut, CFA, in the February 2020 AAII Journal:

40+ years ago I would invest based on how well mutual funds did based on Forbes annual ratings. Since then I have reviewed AAII and others’ reviews of funds. There are more funds than NYSE stocks, yet the information presented stays largely the same in all these reviews. It falls short of what is needed to do any market-beating decisions. The following are some points I wish reviews covered: Manager performance, holdings that make up more than 2% of the fund’s portfolio, percent of undistributed capital gains, funds and managers that have had legal issues and corporate governance analysis.

I remember reading about the performance of index funds countless years ago and how much we have all learned from John Bogle. I have not found any fund’s review that helps me outperform him.
—Jeff from Illinois

Mutual Fund Guide Extras

Comments on “Guide to the Top Mutual Funds,” by AAII Staff, in the February 2020 AAII Journal:

Where is the key to the abbreviations used in the tables; specifically, those used to categorize the kind of shares (institutional, retail, etc.)?
—Pedro from Florida

AAII Staff responds:
Go to the Fund Guide at www.aaii.com/guides/mfguide and you’ll see on the right side in the Expanded Fund Listings section links to category definitions, field definitions and share class type descriptions.

What happened to the annual spreadsheet for all of the mutual funds?
—Ray Holland from North Carolina

AAII Staff responds:
The downloadable spreadsheet has been replaced by adding the functionality to export the fund data to Excel. Look for the Excel button on the far right when at the Fund Guide table of funds for a specific category.