If you’re like most Americans, you may be confused, or even paralyzed, when it comes to developing a financial plan. In fact, most investors I’ve met—including many of those who have a relationship with a stockbroker—don’t have a written investment plan, let alone an overall financial plan designed to incorporate estate planning and risk management…
You made a huge mistake last year with your money. You know this now, right? The only investments in your portfolio that did very well were probably United States stocks. Bonds may have held their own, but everything else was just pitiful. International stocks performed horribly and emerging markets weren’t much better. What were you…
As sure as the sun rises in the east, the start of each year brings with it a fresh wave of assurances from the “gurus” who appear in the financial media that this year will be a stock picker’s year. And as sure as the sun sets in the west, the year invariably ends with…
When I look at hedge funds, there are three data points that keep bothering me. They create a pattern that doesn’t make a lot of sense. I hope you can help me understand what I’m missing. 1. Hedge fund performance has been terrible. In 2014, the Barclay Hedge Fund Index returned 2.88 percent. In that…
In 2014, the HFRX Global Hedge Fund Index lost 0.6 percent, underperforming the S&P 500 Index by 14.3 percentage points. And while the index outperformed foreign equities, which generally lost between about 2 and 5 percent, it underperformed virtually riskless one-year Treasury notes, which returned 0.2 percent. It also underperformed a typical, globally diversified and…
An overwhelming amount of evidence exists to clearly demonstrate that, in aggregate, active management is a loser’s game. And this is true regardless of whether markets are efficient or inefficient, or whether they are in a bull or bear phase. But if the evidence doesn’t convince you, perhaps some of the market’s smartest and most-well-respected…
This is the time of year when investment boards and committees in charge of selecting fund managers for pension plans and 401(k) plans gather for a time-honored ritual. They review the past performance of their fund managers and decide whether to keep or replace them. The point of this elaborate and lengthy exercise is to…
When I look at hedge funds, there are three data points that keep bothering me. They create a pattern that doesn’t make a lot of sense. I hope you can help me understand what I’m missing. 1. Hedge fund performance has been terrible. In 2014, the Barclay Hedge Fund Index returned 2.88 percent. In that same…
The investment successes of the Yale Endowment led many other endowments, foundations and even high-net-worth individuals to consider adopting the so-called “Yale Model.” The model included a focus on alternative investments and attempts to capture the liquidity premium available in illiquid investments, such as private equity and hedge funds. In his new book, Asset Management:…
Although not for novice investors, Andrew Ang’s new book, “Asset Management: A Systematic Approach to Factor Investing,” represents a comprehensive, clearly written and accessible review of the latest thinking in modern financial theory. It provides some important lessons that investors can learn and implement in constructing well-diversified portfolios. I thought it worth sharing some of…
Almost everything we’re taught about money is focused on spending it and saving it. Parents, teachers and even personal finance books discuss saving money as keeping it, increasing it and controlling it. Saving money involves figuring out ways to get more of it, to build a bigger cushion. We’re taught that’s the ultimate goal. In…
Many estate planners advise their clients to complete a useful, albeit sobering, exercise. The exercise calls for the client to assume they have died, and that their beneficiaries are gathered around the dining room table dealing with the aftermath. The point is to identify before the fact some key estate planning questions a client may…
As we have discussed, the investment success of the Yale Endowment led many endowments, foundations and even high-net-worth individuals to consider adopting the strategies utilized in the so-called “Yale Model.” This included a focus on alternative investments and attempts to capture the liquidity premium available in illiquid investments, such as private equity and hedge funds….
Overview: With expected inflation rates very low, there will be significant attention on the possibility of deflation causing the stock market to fall. This blog examines the relationship between the rate of inflation and stock and bond returns. Generally, the research shows that stock returns are no lower in deflationary environments than in normal inflationary ones….
The securities industry is working itself into a frenzy trying to explain why you should ignore historical data that indicates most actively managed funds underperform their benchmarks. Some of the reasons they provide do not withstand scrutiny. Here’s a small sample of their lame excuses: 1. Last year was an aberration. According to Dan Culloton,…
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