The low-interest-rate environment we’ve been experiencing for six years now has led to the increased popularity of high-dividend investment strategies. But the popularity of a strategy, however, can sow the seeds of poor future returns. This occurs because cash flows impact valuations, and valuations are the best predictor of future returns. Given the growing popularity…
As we have discussed many times, much of the conventional wisdom on investing is simply wrong. For our purposes, we can define conventional wisdom as those ideas that are so commonly accepted that they go unquestioned. Today, we’ll look at the idea that rising interest rates would doom returns to real estate investments, specifically the…
As far back as the early 1970s, research has shown that the lowest volatility stocks have provided better returns than the highest volatility stocks. These findings run counter to economic theory, resulting in the low-volatility anomaly. The academic research, combined with the 2008 bear market, has led to low-volatility strategies becoming a darling of investors….
By Sylvia Nissenboim Recently, a friend and I spent a week at the Grand Canyon. Upon our return, a family member picked us up at the airport. Our stories of the challenging excursion ended abruptly as we swerved onto the highway. Instead of blending into merging traffic, my relative slowed down to let…
At the beginning 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. So, it’s now time for our second quarterly review of 10 financial predictions that pundits forecast as certain…
Several years ago, my wife and I sat across from an experienced married couple squirming in their seats as though they feared we were about to deliver some terrible news. But the source of their discomfort was what they were about to drop on us. You see, we were not yet married, but engaged, and…
Unless you work for a city or state government, you probably don’t have a traditional pension — also known as a “defined benefit plan.” The number of employers offering these plans has decreased sharply, and now, by some estimates, only 29 percent of workers in the United States have access to them. In contrast, 83 percent…
The 401(k) landscape is definitely improving. But with this improvement comes a new danger: Your plan may be giving giving you a false sense of security. According to a report on 2013 defined contribution plan data, “How America Saves 2014,” recently published by Vanguard, more than 88 million Americans participate in defined contribution plans. The…
Two of the most studied capital market phenomena are the value effect, where value stocks outperform growth stocks; and the momentum effect, where recent relative performance predicts near-term returns. Clifford Asness, Tobias Moskowitz and Lasse Pedersen add to the body of literature on this topic with their paper, “Value and Momentum Everywhere.” The study, which…
I recently read “The Hour Between Dog and Wolf” by John Coates, and it’s one of the best books on human behavior and finance I’ve ever come across. It could literally help investors get protection from their greatest enemies: themselves. By way of background, Coates is a senior research fellow in neuroscience and finance at the…
Earlier this week, we looked at whether adding credit risk in the form of lower investment-grade municipal bonds was an efficient approach to improving returns. The evidence is clear that this isn’t the case. In fact, taking more credit risk resulted in worse relative performance. Today, we’ll apply the same approach to determine whether adding…
Stocks are about to plunge! Before you panic, this isn’t my forecast and it wasn’t made today. That was the warning from Wells Fargo strategist Gina Martin Adams on September 20, 2013. The S&P 500 index had closed the prior day at 1,726, and Adams was predicting a significant downturn in the market. Specifically, she forecast that the…
by Brian Zdrowak Have you ever tried to see how long you could hold your breath underwater? When I was a kid, whether on family vacations in Picton, Ontario or at a friend’s pool, I would challenge others to see who could last the longest. For the first few seconds, it feels as if you…
Expectations are funny things. When we start to expect something, we also start to count on it. Once we start counting on something to happen, we start to make plans. Then, if we aren’t careful, we even start to act as if it’s already a reality. In our minds it becomes something that’s guaranteed to…
I have nothing but great respect and admiration for our neighbors up north. If you spend any time in Canada, you will be struck by the kindness, civility and charm of its people. Canadians enjoy long life expectancy, high average incomes and extensive social ties. The country ranks very highly on lists of the world’s happiest citizens,…
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