It is absolutely possible to beat the market, just as I’m sure it’s possible that someone could climb Mt. Everest in a pair of roller skates. It is so improbable, however, that it’s rendered a fruitless, if not counterproductive, pursuit. After 16 years in the financial industry and seeing countless great investors eventually humbled by market …Read More.
When we think of financial planning, we naturally focus on the future. We start by getting really clear about where we are today, then we spend time thinking about where we want to be 10, 20 or even 30 years from now. Part of the process includes deciding how much we’ll want to spend, when …Read More.
by Stephen High As the saying goes, the worst lies are the ones we tell ourselves. It’s not that we intend to deceive ourselves. Sometimes, we can have an unhealthy perception of reality, especially when it comes to planning for retirement. Perhaps it’s because planning for retirement involves risks, and risks entail uncertainty. Uncertainty often …Read More.
2013 was another great year for the global hedge fund industry. Net inflows were almost $64 billion and total assets reaching $2.63 trillion. Unfortunately, investors in hedge funds haven’t fared as well as the purveyors. Thus, we have one of the more puzzling anomalies in finance — the continued growth of an industry that for …Read More.
Now that we’ve got one quarter of 2014 behind us, it’s time to review how some financial pundits’ “sure thing” predictions for this year are turning out. Keep in mind that if they were “sure things,” they should all (or at least most) be coming true. We’ll give a score of +1 for a forecast that’s coming …Read More.
The recent appearance of Michael Lewis, author of Flash Boys: A Wall Street Revolt, on 60 Minutes, created quite a stir about the impact of high-frequency traders (HFTs), claiming the game was, and has been, rigged, with the victims being all investors. High-frequency trading is a set of computerized trading strategies characterized by extremely short position-holding periods. …Read More.
Summary Ideally, to eliminate style drift investors should rebalance daily. However, because the real world involves costs, investors should reduce, not eliminate, style drift to an acceptable level. Investors should rebalance wherever there is sufficient cash to make the effort worthwhile, thus eliminating any tax issues and either eliminating or minimizing trading costs. An investor’s …Read More.
From 2000 through 2010, the MSCI Emerging Markets returned 10.9 percent a year, outperforming the S&P 500 by 10.5 percent a year. In typical fashion, investors flocked to emerging market funds. Since then, returns have been poor, providing negative returns in both 2011 and 2013 (as well as in the first two months of this …Read More.
Summary Investors often don’t properly diversify because they think international investing is risky. U.S. equities are mistakenly assumed to be the “safest.” Even if the U.S. is the safest, that does not mean investors should have all their eggs in one basket. Financial economists recommend that investors add international assets to their portfolios, because they …Read More.
William Sharpe and John Lintner are typically given most of the credit for introducing the first formal asset pricing model, the capital asset pricing model (CAPM). CAPM provided the first precise definition of risk and how it drives expected returns. The CAPM looks at returns through a “one-factor” lens, meaning the risk and return of …Read More.
My last post showed that the quality (or profitability) premium provided valuable insights into not only U.S. stock returns, but international developed markets as well. Today I’ll look at the question of whether this quality factor applies to emerging markets. The simple answer is yes. To review, the profitability/quality factor tells us that more profitable firms outperform …Read More.
Today’s post will begin a two-part series that explores the research examining risk-based explanations for the value premium, which, unlike the risk-based explanations of the size premium, have been a bit controversial. In June 1992, the paper “The Cross-Section of Expected Stock Returns” was published in the Journal of Finance. The authors, Professors Eugene F. …Read More.
I have a high regard for accountants. They have an extremely difficult job. In order to maximize tax savings for their clients, they need to understand and interpret an incredibly complicated Internal Revenue Code. Former U.S. congressman John Hostettler once said, “The Internal Revenue Code and regulations add up to 1 million words and is nearly seven …Read More.
Exchange-traded funds are open-ended funds that can be bought and sold on a stock exchange. You can think of them as a hybrid version of both stocks and index funds. You buy them using a broker, just like you would to purchase a stock. They consist of a portfolio of securities that are designed to …Read More.
The recent appearance by Michael Lewis on 60 Minutes and the publication of his book Flash Boys has generated a furor over the perceived inequities of high-frequency trading. The idea that those engaged in high-frequency trading are permitted to “see” your trades, purchase stock ahead of your order and resell it to you at a higher price is clearly …Read More.
