As sure as the sun rises in the east, at the start of each year, you’ll hear from “gurus” appearing in the financial media that this year will be a stock picker’s year. And as sure as the sun sets in the west, when the year ends, you will hear various excuses for why it…
Leonard Kostovetsky and Jerold Warner, the authors of the study You’re Fired! New Evidence on Portfolio Manager Turnover and Performance, which was published in the August 2015 issue of the Journal of Financial and Quantitative Analysis, contribute to the literature on the performance of money managers by examining managerial turnover at both internally managed mutual…
From 1980 to 2014, the percentage of American households that owned mutual funds rose from 5.7 percent to 43.4 percent. At the beginning of 1980, mutual funds held only around 4 percent of all U.S. equity. However, that figure is now around 30 percent. That increased share is basically explained by the fact that direct…
As markets start off the new year with a global slide in prices, you may want to re-acquaint yourself with a concept often found in standard introductory courses on economics–the difference between systematic and nonsystematic risk. Your retirement assets could depend on it. While those words may sound like a bunch of financial mumbo jumbo,…
Suppose you had a friend whose lifelong dream was to travel overseas. But this friend was deathly afraid of experiencing turbulence on an airplane. So he decided to forgo his trip until a new plane was invented, one able to guarantee with absolute certainty that passengers would never feel turbulence. You might be thinking, “Good…
The headline of a December article in The New York Times declared: “Private Equity Fees Are Sky-High, Yes, but Look at Those Returns.” The author, Steven Davidoff Solomon, was making the case that while “critics love to complain about private equity and its exorbitant fees … as an asset class and with the right fund,…
At the start of 2015, I put together a list of predictions that financial “gurus” had made for the upcoming year, especially the ones that gained consensus as “sure things.” I then kept track, through a series of periodic updates, of whether these “sure thing” forecasts actually came to pass. Well, the inevitable turn of…
How do some of the market’s most recognizable active mutual fund families stack up to a comparable passive counterpart? To explore that question, I’ll continue my evaluation of active fund performance with an in-depth look the Hartford family of funds to determine whether the firm adds value for investors. Why Hartford? Aside from its prominent…
When we say the word “risk” to clients, we’re most often thinking of technical things. Like volatility or standard deviation. But when clients hear the word “risk,” they’re thinking of the chances they’ll run out of money or fail to meet an important goal.That’s a big disconnect, and super frustrating for both you and your…
Every year, I like to keep track of the predictions that “gurus” and other market observers make for the upcoming year, specifically the ones that they say are “sure things.” It seems like no one in the financial media holds them accountable (which is a shame, since the evidence shows there are no good forecasters),…
I agree with the glowing reviews of The Big Short. The film does a wonderful job of exposing the mendacity of the financial industry and the role it played in almost causing a worldwide economic collapse. Its depiction of Wall Street as infested with greed, devoid of ethics and indifferent to the real-life consequences of…
Ken French’s recently updated global factor data shows the global size and value premiums were basically flat for the past 10 years (the value premium was actually about –1 percent per year over this span). This long-term historical result has surprised many people and naturally led some to ask whether these premiums can be expected…
Recently, my family needed a new vehicle. I’ve always wanted a truck, and I knew we would get tons of use out of it. Could I have found a cheaper vehicle? Sure. But I knew we could afford the truck, so after lots of careful thought, we decided to buy it. Anytime I make a…
A good friend, Sherman Doll, related the following story. Sherman has been a two-line sport kite flier for years. While not a pro, he has learned a few tricks from observing the flying behavior of these kites. He told me that one of the most difficult skills for beginners to master is what to do…
I don’t know Warren Buffett. I didn’t interview him for this article. But I’m pretty sure I know what he isn’t doing to cope with the worst first four trading days in history for the S&P 500 index to begin a calendar year. Buffett isn’t listening to pundits on TV The financial media loves market…