You might think that the most important work a financial advisor can do is related to allocating a client’s investment portfolio, or perhaps helping secure a timely insurance policy or drafting the optimal estate plan. In fact, their most important work is done when clients are in the midst of navigating life’s major transitions. I …Read More.
My column from July 14 on the persistence of the small-value premium resulted in some interesting discussions on the subject. I thought it would be informative to share one of them. One reader pointed out that in the past 20 years, midcap value stocks had outperformed small-value stocks. For the period from July 1994 to June 2014, …Read More.
The evidence is overwhelming that most actively managed funds underperform their appropriate benchmarks, especially after taxes. However, not all actively managed funds underperform, just a large majority of them. Those who believe in active management as the winning strategy believe they can identify the small minority of actively managed funds that will outperform. The only-somewhat logical way …Read More.
The first half of this year again brought hedge funds little relief from their historically poor performance. Hedge funds began 2014 coming off their fifth-straight year of trailing U.S. stocks by some significant margins. And based on data through June 30, it doesn’t look like this year is shaping up to be much better. The latest data …Read More.
The metric most commonly used to categorize value stocks and to construct portfolios is the one employed by the Fama-French three-factor model—book-to-market (BtM) ratio. Russell Indexes only uses BtM to determine value as well. However, other metrics also show a value premium. Today we’ll take a look at the historical evidence on the premiums provided …Read More.
As if equity investors didn’t already have enough to worry about, one of the new concerns getting a lot of attention recently is that the baby boomer cohort — now starting to retire — will fund their retirement by selling equities. The “conventional wisdom” is that this supposed sell-off will result in a stock market …Read More.
Q: How can you effectively harvest tax losses in bonds? A: The prospect of higher interest rates scares a lot of investors as that can mean lower bond prices and the potential for losses. You can, however, take advantage of these losses to help improve the overall portfolio return. The simplest, most effective way to take …Read More.
For more than a decade, my family and I have gone to Jackson Lake in Wyoming for what’s become our favorite summer vacation. Because the trip includes a boat, we make arrangements to rent a mooring for the boat so we don’t have to take it in and out of the water each day. Last …Read More.
I’ve heard it estimated that out of all the financial and estate planning recommendations that advisers make, their clients ignore more than 80% of them. If there’s even a shred of truth in this stat, it represents a monumental failure of the financial advice industry. Unfortunately, I think there’s a lot of truth to this …Read More.
Historically, retirement planning has been likened to a three-legged stool — consisting of a corporate pension, Social Security and personal savings. Baby boomers saw the pension fade from existence, leaving them to balance on retirement planning stilts. For younger generations, however, the retirement situation can seem even worse. Sometimes, it feels like it’s all on us. We’re left with …Read More.
You are besieged with a daily onslaught of what passes for “financial news.” Much of it is nonsense, self-serving and unreliable. Yet the sheer volume, and the clever way it is packaged and disseminated, may lead you to take action. Here are two categories of typical financial news, with my suggestion for how to evaluate …Read More.
There can be little dispute over the sad state of returns for many investors. My colleague at the BAM Alliance, Carl Richards, used Morningstar data to note this disturbing fact: The average U.S. stock mutual fund had a 10-year average return of 8.18 percent at the end of 2013. The average investor only earned 6.52 …Read More.
“For some months now, Jeremy Grantham, a respected market strategist with GMO, an institutional asset management company, has been railing about the efficient market hypothesis.” So began a June 6, 2009, New York Times article by Joe Nocera. He went on to note: “While Grantham was an early advocate of index funds for unsophisticated investors …Read More.
Vanguard Group founder John Bogle created the first index funds available to individual investors in 1976, and ever since then he’s been a tireless champion of their use. Given that passive ETFs can provide advantages—such as lower costs and greater tax efficiency—over index mutual funds, you might think that Bogle would be a big proponent …Read More.
You’ve heard that baby boomers, as well as Generations X and Y, are behind on theirretirement savings, right? These demographics are regularly bludgeoned in the media and by the financial industry’s marketing machine for their negligence in saving for the future. While some in the media are well-intentioned in their criticism, I can’t help but recognize …Read More.
