Years ago, my colleagues and I conducted a fairly large-scale research project. We interviewed a bunch of high-income professionals who provided professional services. This group included doctors, dentists and lawyers, and like most of us, they earned money only when they were working. In essence, they traded their time for dollars. Our finding was this:…
How did you spend August 2015? Take a moment to really think about this question, as it can have serious implications for your portfolio in 2016 and beyond. As you may recall, this was the month we were all reminded about what “volatility” means. As the markets reacted to a devaluated yuan and plunging oil…
Today’s investors may have drawn the proverbial “short straw.” From an investment perspective, they are confronting what might be considered a “perfect storm” creating strong head winds against higher expected returns. We’ll begin by discussing the three main factors conspiring against them, then analyze some of the options investors might employ to combat this problem….
I write about investing, not politics. By invoking Donald Trump as an example, please understand that I’m taking no political position. That said, there are some surprising lessons you can learn from Trump about investing. Here are two of them: The power of indexing While the exact amount of Trump’s wealth is subject to debate,…
At some point, we’ve all had a client walk into the office and start a sentence with something like “I heard” or “I read.” This happened pretty regularly after David Swensen wrote a book about his experience managing Yale’s endowment fund. For a while, the guy was everywhere, and more than a few clients wanted…
Previously, we examined three main factors conspiring against investors seeking higher expected returns. These factors can combine to generate a “perfect storm,” at least from an investment perspective, facing today’s investors. We then turned to the four most effective ways that investors can fight these head winds, which, oddly enough, have nothing to do with…
J.B. Heaton, Nick Polson and J.H. Witte recently authored a nice short paper—it’s all of four pages—entitled “Why Indexing Works.” In it, the authors developed a simple stock selection model to explain why active equity fund managers tend to underperform their benchmark index. While most of the academic literature focuses on the efficiency of the…
Many investors today are confronting what could be considered a “perfect storm” that is creating strong head winds against the pursuit of higher expected returns. So far, we have discussed the main factors currently working against investors, as well as some steps they might consider taking to help combat this problem. We will now examine…
Eleven years ago, I needed a new bike. At the time, I rode a lot. I was in a big group of relatively competitive riders, and we’d often put hundreds of miles on our bikes each week. I agonized over what bike to buy, but I kept coming back to one made by a company…
Over the past week, we’ve taken an in-depth look at why today’s investors are facing a “perfect storm” of factors that, when combined, can significantly hinder the pursuit of higher expected returns. In taking on this problem, we have so far discussed the elements working against investors, as well as some steps to help combat…
Ask someone how they invest, and you’ll probably get a pretty standard answer involving stocks, bonds and maybe some real estate or cash. But rarely will people mention something that is even more important: their investments in human capital. They don’t talk about it because human capital investments can look a lot like any other…
As we have discussed many times, much of the “conventional wisdom” on investing is simply wrong. For our purposes, we can define conventional wisdom as those ideas that become so commonly accepted that they go unquestioned. Today we’ll look at the idea that rising interest rates would doom returns to real estate investments, specifically the…
It’s been said that diversification is the only free lunch in investing because, done properly, an investor can reduce risk without reducing their expected return. Yet despite this wisdom, many individuals hold concentrated positions in a single stock when they could easily diversify away that idiosyncratic, single-company risk. Which, then, begs a critical question: given…
Do you remember the scene from It’s A Wonderful Life—only the best holiday movie ever—when George and Mary Bailey are cruising out of Bedford Falls on their well-earned honeymoon, only to notice a literal run on the banks (including the Bailey Savings and Loan, which George reluctantly operates)? Well, as Mark Twain is attributed as…
By Sylvia Nissenboim Both caregiving for an elderly loved one and preparing for the holidays can come with a lot of joy, but also some unintended stress. As such, it’s vital that caregivers don’t overload themselves as they balance the day-to-day demands of caring for an older family member with the additional commitments that pop…