Q: Can you capture higher returns on a municipal portfolio by lowering its credit quality? A: Investors generally demand a higher yield when purchasing lower-credit-quality municipal bonds due to their greater risk. The assumption is the greater the risk, the greater the expected return. However, evidence has shown that investors have not realized higher risk-adjusted…
Q: What are the characteristics of preferred stocks? A: Preferred stocks can be viewed as a hybrid of stocks and bonds. Preferred shareholders receive preference over common equity holders (hence the term “preferred”) for dividend payouts and in the event of a Chapter 11 bankruptcy filing. However, all debt holders would be paid before any…
On Aug. 25, the S&P 500 index closed above 2,000 for the first time — finishing at 2,000.24. It had taken the index more than 16 years to double from its first close above 1,000 on Feb. 2, 1998, when it finished at 1,001.27. That 16-year span is more than five times as long as…
Proponents of evidence-based investing, myself included, doubted whether this day would ever come. Investors are now actually paying attention to the overwhelming data supporting evidence-based investing and are fleeing active management. Some of the recent developments reinforcing this growing trend are: Index funds are mainstream John Rekenthaler is the vice president of research for Morningstar….
Momentum is a well-established, empirical fact. Its premium is evident in more than 87 years of domestic market data, in more than 20 years of out-of-sample evidence beginning from the time of its original discovery, in statistics from 40 other countries, and in the performance of more than a dozen different asset classes. In fact,…
Last week, I wrote in-depth about some of the problems with hedge funds, especially in terms of how they’re viewed and how they affect financial markets as a whole. I thought I’d begin this week with a closer look at the performance of private equity, another nonpublicly traded investment. The term “private equity” is used…
Q: What are the characteristics of preferred stocks? A: Preferred stocks can be viewed as a hybrid of stocks and bonds. Preferred shareholders receive preference over common equity holders (hence the term “preferred”) for dividend payouts and in the event of a Chapter 11 bankruptcy filing. However, all debt holders would be paid before any…
On Aug. 25, the S&P 500 index closed above 2,000 for the first time — finishing at 2,000.24. It had taken the index more than 16 years to double from its first close above 1,000 on Feb. 2, 1998, when it finished at 1,001.27. That 16-year span is more than five times as long as…
Just about anything that comes with the “alternative” label is automatically enticing to plenty of people. Alternative rock spoke to so many music fans that it became more or less mainstream in the 1990s. On a smaller scale, consider the people you know living alternative lifestyles, like the cousin in the nudist colony or your…
Almost everyone believes a stock market correction is inevitable. The financial media whip up a daily frenzy of anxiety by offering conflicting views from “investment pros” on when this correction will occur. Here are some tips for dealing with the “market correction” issue. Don’t try to time the correction There is no academic evidence indicating…
All performance-based advertising should be banned. Your telephone rings. The call is from an executive recruiter. She has some really good news. You are being offered a position as the fund manager for a large-cap mutual fund. Large-cap stocks are those of companies with a market capitalization value of more than $10 billion. The companies…
“We should just move to the country and live in a tent.” I mention this idea to my wife every time I’m confronted with one of the realities of living in Park City, Utah. It seems like almost everyone here is an athlete of some sort, and they take their sports seriously. From mountain biking…
Despite extremely poor returns, the growth of the hedge fund industry has been explosive. Assets under management grew from about $50 billion in 1990 to more than $2 trillion by 2007. Today that figure is at an estimated $3 trillion. It’s believed hedge funds account for almost a third of the average daily stock market…
Investors tend to think of hedge fund managers as the superstars of the financial world. Collectively, it’s estimated they now manage somewhere in the neighborhood of $3 trillion. Unfortunately, their reputation hasn’t translated into the type of returns that live up to all the hype. As we’ve continued to demonstrate over the years, the hedge…
The combination of the S&P 500 Index losing about 1 percent per year during the decade from 2000-2009 and a rising tide of obligations caused a “perfect storm” for public workers’ pension funds across the country. These funds increasingly began turning to riskier alternative investments in private equity and hedge funds in an effort to…
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