Q: What are callable bonds? And what are the risk and return of callable bonds? A: Callable bonds are fixed income securities that give the issuer the right, but not the obligation, to call in, or prepay, the bond prior to maturity. Issuers can be expected to exercise this right if they are able to …Read More.
Watch the video on Multifactor World. …Read More.
Q: Should you stay invested in the short term while waiting for interest rates to rise? A: First, other than very short-term interest rates that are heavily influenced by the Federal Reserve, it’s difficult to predict changes in interest rates. Second, to determine whether a short-term fixed income approach will be superior to an intermediate-term …Read More.
The stock premium, the annual average return of stocks minus the annual average return of one-month Treasury bills, has historically been high. This fact has, understandably, attracted investors to the stock market. For the period 1927-2013, the stock premium averaged 8.18 percent. There has also been a size premium (the return of small stocks minus …Read More.
A new multi-part British documentary, How to Win the Loser’s Game, takes a hard look at active management. Although done with typical understatement, the results are not pretty. The complete documentary will not be available until Nov. 5. But you can view the first three parts, produced by Sensible Investing, here. It should be required …Read More.
You don’t need to pick stocks or eschew all risk to be a good investor. Convenient truths vs. evidence-based investing It’s easy for investors to absorb myths on best investing practices from the media and financial pundits. That’s why it’s important to know the difference between well-researched advice and entertainment masquerading as financial news. Be …Read More.
Today we’ll take a look at how the size and value premiums performed in 12 recessions, identified as such by the National Bureau of Economic Research, occurring in the post-World War II era. During that period, the average length of a recession was 11 months. Size Premium While the size premium from 1926 through 2013 …Read More.
As if PIMCO needed any more bad press, The Wall Street Journal reported this week that the Securities and Exchange Commission is investigating whether the bond giant “artificially boosted the returns of a popular fund aimed at small investors.” While we should all be attentive to the results of this probe—because I’d bet my lunch …Read More.
An interesting article in Bloomberg noted that the recovery in this year’s Treasury market has been stronger than the rally predicted by every economist they queried in a recent survey. In mid-August, Bloomberg contacted 66 economists for their Sept. 30 forecasts on the 10-year yield for Treasury bonds. The 10-year yield closed on Aug. 28 …Read More.
There is a wide body of evidence demonstrating the existence of momentum not only in stocks, but across asset classes. There’s also evidence that moving-average indicators provide higher risk-adjusted stock returns in recessions. On the other hand, while major data vendors, such as MarketWatch and Bloomberg, report daily on technical market indicators (for example, advance …Read More.
I am sometimes described as “contrary.” Actually, the more commonly used terms are “opinionated,” “arbitrary” and “judgmental.” There may be varying degrees of truth to all of them. Today, however, rather than temper or minimize my “contrarian” views, I’ve decided to embrace them. Some of the statements I’m told fall into this category are: 1. …Read More.
We’re really good at telling ourselves stories. One story I told myself for a long time was that I needed to buy a lot of books. It’s my job to be on top of things, so I’d go to Amazon, read a sentence or two of a review, and buy the book. Over time, this …Read More.
Today we’ll turn our attention to the two risk premiums that help explain the performance of bond portfolios—term and credit. Unlike with the value premium, there’s no debate about whether these two factors earn premiums based on risk. They are not anomalies created by behavioral errors. The data covers the same 87-year period, 1927-2013, that …Read More.
One of the most important investment decisions you make is in determining your asset allocation, or how you choose to divide your assets between risky and safe investments. Another key decision concerns which strategy to use when selecting the funds to implement your asset allocation plan. Should you be a buy-and-hold investor? Or should you …Read More.
Historical market data are often misused by pundits who believe they can predict the future by looking at the past. Much of what counts these days as “financial news” is simply a parade of self-styled “pros” peering into their crystal balls and telling the rest of us how to time the market, pick outperforming stocks …Read More.