Larry Swedroe Most investors are well aware of the SEC’s warning that past performance isn’t an indicator of future performance. That warning often leads to questions like: “If past performance isn’t predictive, why do you believe that the past outperformance of value stocks over growth stocks and small stocks over large stocks is predictive?” The…
By Thomas J. Emmerling and Jared Kizer Much has been written about the risks that rising interest rates pose to fixed income portfolios. However, much of this analysis has been simplistic or focused on historical periods, which are of little relevance in today’s environment of ultra-low nominal rates. On the simplistic side, market commentary has…
It can be very difficult to separate the good advice from the questionable and the questionable from the downright irresponsible. Unfortunately, good advice doesn’t always walk around wearing a sign, but there are some red flags to help you avoid the so-called advice that’s actually irresponsible. Case in point: What do you think when you…
I love uncovering tidbits about our financial lives in generally nonfinancial books, music, movies and even television commercials. You’ve no doubt seen the commercials for the Mexican beer Dos Equis, in which a nameless, well-dressed, bearded man only described as “The Most Interesting Man in the World” shares supposed wisdom that is quite intentionally humorous—even hysterical at…
According to the Law Blog on The Wall Street Journal website, controversial Los Angeles Clippers owner Donald Sterling has retained Maxwell Blecher, a highly respected Los Angeles antitrust lawyer in his fight against the NBA. (Full disclosure: I have enjoyed a personal and professional relationship with Mr. Blecher for many years.) It’s not surprising that Mr. Sterling would elect…
There is a potential problem looming in your retirement portfolio. Unfortunately, there is little you can do about its cause because it resides in the deep recesses of your brain. As we age, the likelihood that many of us will be afflicted with Alzheimer’s or other dementia increases. By some estimates, 14 million people in the…
Sometimes, valuable insights about investing can be derived from unlikely sources. According to published reports, the largest home purchase in U.S. history recently closed. The property is an 18-acre estate located in East Hampton, N.Y. The purchase price was an astounding $147 million. Was the purchaser a famous industrialist? The inventor of an amazing new product?…
I confess that for a stretch of time, I convinced myself that having The Economist lying around would make me smarter, even if I never picked it up. Just by being in the same room, I’d somehow learn by osmosis about the news in each issue. Also, I liked having people think of me as…
I’d like to share with you a quick primer on fraud. You can engage in fraud by intentionally misrepresenting a “material fact,” knowing it is false and that the person to whom it is made will rely on it. If I am selling you my home and tell you it recently passed a termite inspection,…
In a Dec. 23, 2011 article, New York Times columnist Ron Lieber wrote about my personal investment strategy, which can be described as a low-beta/high-tilt (to small and value stocks) portfolio. I want to circle back to it to illuminate important points about diversification. Lieber called it the “Larry Portfolio,” or the “LP,” as we…
Vanguard is clearly the leading provider of index fund products. Dimensional Fund Advisors is also the clear leader in its “space,” managing about $350 billion in assets in what we might call structured asset class portfolios. (Full disclosure: My firm Buckingham recommends Dimensional and Bridgeway funds in constructing client portfolios.) They are both leaders because…
The 2006 publication of Gary Gorton’s and K. Geert Rouwenhorst’s study “Facts and Fantasies about Commodity Futures” spurred an increase in the interest of using the asset class of commodities to enhance the performance of financial portfolios. In fact, commodity investments more than doubled from roughly $170 billion in July 2007 to $410 billion in…
It’s not as if investors didn’t already have enough to worry about in the uneven aftermath of the financial crisis. Now, money pundits are crowing that record profit margins might soon pose a problem in markets. Some of the worries coursing through the markets these days include: A dysfunctional Congress’s failure to address the long-term…
Today concludes a two-part series on myths about momentum. We’ll pick up right where we left off with the additional myths the paper “Fact, Fiction and Momentum Investing” discusses. Read the rest of the article on Seeking Alpha.
Today begins a two-part series on momentum and the myths that surround it. Momentum is the phenomenon that explains how securities, which have performed well relative to peers (winners), on average, continue to outperform, and securities, that have performed relatively poorly (losers), tend to continue to underperform. Jegadeesh and Titman are credited with the first…