Princeton professor Burton Malkiel predicts that “U.S. stocks should produce returns of about 7%, five points higher than the yield on safe bonds” for the long-run future. Writing in today’s Wall Street Journal, the author of the best selling A Random Walk Down Wall Street advises that “stocks were losers to bonds in 2011. But don’t invest with a rear-view mirror. U.S. stocks, available in a broad-based index fund or ETF, are more attractive than bonds today.”

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Job creation accelerated sharply last month, according to the ADP Employment Report. U.S. nonfarm private employment rose a seasonally adjusted 325,000 in December–up dramatically from November’s 204,000 net gain. December’s advance is the strongest monthly gain in the history of this series, which dates to 2000. ADP’s estimate for job growth is coupled with news that initial jobless claims fell a healthy 15,000 last week to a seasonally adjusted 372,000, or the lowest level since May 2008. It’s starting to look like there’s a tailwind in the labor market. The recent drop in jobless claims has been anticipating as much and the forecast appears to be turning into reality.

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Financial Advice and Individual Investor Portfolio Performance
Marc Kramer (University of Groningen) | December 2011
This paper investigates whether financial advisers add value to individual investors’ portfolio decisions by comparing portfolios of advised and self-directed (execution-only) Dutch individual investors. The results indicate significant differences in characteristics and portfolios between these investor groups, but no evidence of differences in risk-adjusted performance. The findings indicate that portfolios of advised investors are better diversified and carry significantly less idiosyncratic risk. In addition, evidence from an analysis of investors who switch to advice taking indicates that these findings (at least in part) reflect the effect of advisory intervention.

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