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Explaining The Low Vol Anomaly

ETF

One of the biggest problems facing the first formal asset pricing model developed by financial economists, the capital asset pricing model (CAPM), was that it predicts a positive relationship between risk and return. Empirical studies have found that the actual relationship is flat, or even negative. But the superior performance of low-volatility stocks was documented…

This Book Obliterates Active Management

US News

An intriguing new book, “The Incredible Shrinking Alpha,” presents an overwhelming weight of research which leads to the inescapable conclusion that the pursuit of “alpha,” or returns above an appropriate risk-adjusted benchmark, is a fool’s errand. The book was written by my colleague Larry Swedroe, director of research at The BAM Alliance, and Andrew Berkin,…

Dumb Investing Ideas

Huffington Post

No wonder the average investor significantly underperforms market returns that are theirs for the taking. After all, the financial media and the securities industry inundate investors with a daily barrage of new products and misleading information. Here are some recent examples: A dumb idea from Fidelity As reported in The New York Times, Fidelity has…

Almost Everything You Know About Investing Is Wrong

US News

Many of you have some fundamental beliefs about the process of investing. These beliefs understandably guide your investing behavior. Unfortunately, they are often dead wrong. This is not surprising, because the financial media and the securities industry have a vested interest in encouraging short-term thinking and other emotional behavior harmful to your returns. Here are…

Heed Buffett & Ignore Forecasts

ETF

Earlier this week, we discussed the first six of a total 12 lessons that the markets taught us in 2014 about prudent investment strategies. To recap: Lesson 1: Active management is a loser’s game Lesson 2: The economy and the stock market are very different things Lesson 3: Diversification is always working; sometimes you like…

What are the risks of alternative yield-seeking strategies?

Q: What are the risks of alternative yield-seeking strategies? A: Replacing a portion of your high-quality bond or bond mutual fund holdings with strategies ranging from high-dividend stocks to oil-and-gas master limited partnerships because “rates are low” involves taking on substantially more risk. A more efficient way to increase your level of risk is to…

A Powerful Force Is Killing Your Retirement

Huffington Post

Investment “professionals” could be killing your chances of retiring with dignity, if at all. This extract, from one of America’s most respected financial journalists, William Bernstein, should be read and reread by every investor: “There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and…

Hedge Funds Flop. Again.

ETF

Today marks the final installment in my series addressing the lessons that the markets taught us last year about prudent investment strategies. As we noted previously, 2014 provided us with a total of 12. You may have observed by now that many of these same lessons show up year after year. And many times, the…

Plan Sponsors’ Weak Returns

ETF

Institutional plan sponsors are charged with investing trillions of dollars on behalf of pension plans, endowments and foundations. As a result, the quality of the investment decisions made by these plan sponsors is of great interest and importance to a great many people. Over the years, I’ve met with many institutional plan sponsors to discuss…

Recency Bias Damages Returns

ETF

One of the more common and costly investing mistakes that individuals tend to make involves the behavior known as “recency,” which can be described as the bias toward overweighting recent events or trends, and ignoring long-term evidence. Recency leads investors to buy after periods of strong performance (high) and sell after periods of poor performance…

Last Year’s Financial Predictions

ETF

At the start of each year, I compile a list of predictions that financial gurus and industry experts tell us are a “sure thing.” And each year, I track how many of these predictions actually come true. This marks our fourth and final quarterly review of some consensus financial predictions that pundits in the financial…

Investing Facts You Probably Don’t Know

Huffington Post

Intelligent and responsible investing can be simple and uncomplicated. It involves buying a globally diversified portfolio of low management fee index funds, exchange-traded funds (ETFs) or passively managed funds in an appropriate asset allocation. After the initial purchase, there is very little to do except rebalancing perhaps once or twice a year and tax-loss harvesting…

Investment Lessons From 2014

ETF

Every year, the markets provide us with some valuable lessons about prudent investment strategies. Many times, the markets offer investors a remedial course that covers lessons it had imparted previously. That’s why I like to say there’s really nothing new in investing, only investment history you don’t yet know. Last year provided us with 12…

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