For more than a decade now, Standard & Poor’s has been contributing to the debate over active versus passive investing by producing its S&P Indices Versus Active Funds, or SPIVA, scorecards. These twice-yearly scorecards evaluate the evidence concerning the performance of actively managed funds relative to their benchmarks. They show, year after year, that fewer …Read More.
What if you could create a forum for discussing the best way to invest in a responsible and intelligent manner? Who would you invite to participate in this debate? Here are my suggestions: There would be no shortage of candidates to advocate stock picking, market timing and fund manager selection. Jim Cramer, for example, could …Read More.
If insanity is doing the same thing over and over and expecting different results, investors are insane. The way many investors manage their money seems to perfectly describe Albert Einstein’s definition of insanity: Doing the same thing over and over again and expecting different results. Here’s what isn’t working: trying to predict when to enter …Read More.
“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 …Read More.
When I lived in Las Vegas, there were billboards everywhere advertising different casinos. One of the most common was the type that promised “98 percent payouts.” I remember thinking how amazing that was. After all, 98 is a lot of percents! It seemed like a really good deal — until I thought about it for …Read More.
Smart investors begin their journey by developing an investment plan, or investment policy statement, that includes an asset allocation table. After the plan has been prepared, the next step is to select proper investment vehicles for providing the appropriate exposure to the desired asset classes. A common error among investors who follow a “passive” investment …Read More.
The financial media continues to stoke anxiety and fear — and trading — with “news” about a coming market correction. On its list of “must reads” for July 16, Yahoo Finance featured these articles: “Investors haven’t been this optimistic since 1987. Here’s why that’s bad.” “This could be a big problem for stocks.” Sometimes these …Read More.
Much of what is written about retirement planning focuses on investing. I am guilty of contributing to the volume of that literature. My book, “The Smartest Retirement Book You’ll Ever Read,” discusses how to invest intelligently so that you can retire with dignity. I certainly don’t mean to trivialize the importance of careful financial planning. Without such …Read More.
For the decade from 2004-2013, the momentum premium—as measured by the Fama-French momentum factor—experienced a negative compound return of -1.2 percent per year. (This number was calculated using the monthly momentum premium figures from the Fama-French data series. Note that returns on factors are generally expressed as annual averages, not annualized returns, and during this decade …Read More.
Don’t get stuck in your own backyard. Investors should consider building globally diversified equity portfolios that avoid the persistent and worldwide phenomenon of home-country bias. That’s when you allocate a greater weight to your home-country stocks than their percentage of total global market capitalization. Among the reasons investors around the world exhibit this bias is …Read More.
Earlier this week, we took a look at some of the historical evidence on the persistence of the Fama-French momentum factor. Today we’ll examine the momentum premium’s out-of-sample record, as well as its uses in portfolio diversification. The authors of the 2013 study, “212 Years of Price Momentum,” concluded that the most recent decade-long underperformance …Read More.
There is no shortage of receptacles clamoring for your money each day. No matter how much money you have or make, it could never keep up with all the seemingly urgent invitations to part with it. Separating true financial priorities from flash impulses is an increasing challenge, even when you’re trying to do the right …Read More.
Years ago, a friend with an incredibly successful career as a sales representative shared a story about what she and her brother called their W-2 Derby. It’s exactly what it sounds like. At the end of each year, they’d pull out their W-2s and compare who had the higher income. There were even rules for …Read More.
Q: What are the differences between a brokered CD and a bank CD? A: A certificate of deposit is a type of bond that has a stated maturity and coupon payment. Most CDs offer a fixed interest rate, and maturities can range from one month to 30 years. CDs have insurance from the Federal Deposit …Read More.
Over time, we’ve come to accept the concept that knowledge is power. In theory, when we have more knowledge, we can make better decisions. But for many of us, there can be a disconnect between knowing something and acting wisely on that knowledge. As you probably know from experience, it happens often with money. Last …Read More.
