In my book, Think, Act, and Invest Like Warren Buffett, I noted that the Oracle of Omaha advised investors: “We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept locked up…
Today begins a two-part series on international bonds and whether or not they belong in your portfolio. Broad diversification of risk is one of the prudent rules of investing – since it’s the only free lunch in investing, you might as well eat as much of it as you can. For equity investors, an important…
Today we continue our discussion on international bonds. We’ll begin with a Vanguard study. Vanguard reached the same conclusions we discussed in yesterday’s post in their February 2014 research paper “Global fixed income: Considerations for U.S. Investors.” The paper states: For the average investor seeking to further mitigate volatility in a diversified portfolio, foreign bonds can play…
There’s an interesting new paper by Claude Erb, “Has the Stock Market Been Overgrazed?” He begins with noting that over time (since the 1920s), the beta, size and value premiums have all declined. He then asks: “What if too many investors are demanding too much from a possibly limited supply of opportunities?” Said another way,…
Today we continue our discussion on international bonds. We’ll begin with a Vanguard study. Vanguard reached the same conclusions we discussed in yesterday’s post in their February 2014 research paper “Global fixed income: Considerations for U.S. Investors.” The paper states: For the average investor seeking to further mitigate volatility in a diversified portfolio, foreign bonds can play…
Today begins a two-part series on international bonds and whether or not they belong in your portfolio. Broad diversification of risk is one of the prudent rules of investing – since it’s the only free lunch in investing, you might as well eat as much of it as you can. For equity investors, an important…
In my book, Think, Act, and Invest Like Warren Buffett, I noted that the Oracle of Omaha advised investors: “We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept locked up…
There’s an interesting new paper by Claude Erb, “Has the Stock Market Been Overgrazed?” He begins with noting that over time (since the 1920s), the beta, size and value premiums have all declined. He then asks: “What if too many investors are demanding too much from a possibly limited supply of opportunities?” Said another way,…
Today concludes our four-part series on the efficient market hypothesis. While the EMH helps us understand how markets work, in terms of investment strategy it really doesn’t matter whether markets are efficient or not. The only thing that really matters is whether you can exploit inefficiencies persistently, after the expenses of the effort. That has proven to be extremely…
There are many investors who have a hard time accepting the fact that when a company pays a dividend the payment results in a permanent relatively lower price (relative to what the price would have been the dividend had not been paid), not just a lower price on the day it makes the distribution. The problem results…
One of the more persistent investment myths is that the winning strategy is to sell stocks in May and wait to buy back until November. While it is true that stocks have provided greater returns from November through April than they have from May through October, since 1926 there has still been an equity risk…
This is the first of a two part series that aims to define risk. Since we live in a world without crystal balls that allow us to clearly see the future, prudent investing is all about the management of risk and expected returns. A problem that both investors and investment advisors face is defining what exactly risk…
Today concludes our two-part feature that aims to define risk. Not being able to do so is a problem for both advisors and investors. Alternative Definition of Risk Risk can also be defined as the probability of not achieving your financial objective – with the objective generally being not the accumulation of the greatest wealth, but instead,…
Part one of our series introduced the efficient market hypothesis. Part twoexplored evidence in the mutual fund and pension plan worlds that showed that while the EMH fails all the tests of efficiency, it passes the only test that really matters – are active investors likely to outperform appropriate benchmarks after the expenses of the effort? Today,…
Yesterday, we discussed the history and overview of the efficient market hypothesis. Today we’ll look at some of the evidence on the efforts of mutual funds and pension plans to generate alpha. Mutual Funds Each year, Standard & Poor’s publishes its Indices Versus Active Funds Scorecard, more commonly referred to as SPIVA, presenting the evidence on the…