Normally when we talk about the perils of performance chasing, we are referring to investors buying into asset classes that have done well in the recent past and avoiding those that haven’t fared as well. Right now, for example, investors want to own US large cap stocks because the S&P 500 is up 13.74 percent over the five years ending Oct. 5, 2015 and want to avoid emerging market stocks… Read More
The Wall Street Journal ran an interesting article over the weekend entitled, ‘Three Things to Know About Smart Beta.’ You can find the article here, but you may need a subscription. Before diving into the article, the first thing you should know is that smart beta is the marketing term for tilting your portfolio towards factors like size, value, momentum and quality. We call this factor investing, but there are tons of names in the market… Read More
I recently stumbled upon a fascinating website, the Milken Institute’s Best Cities for Successful Aging. I was doing some research to try and determine whether moving to a state without income tax like Florida or Texas really made a difference to an overall retirement plan. I created a hypothetical client and ran 10,000 scenarios that were identical other than the state where the client retired. As I expected, the difference… Read More
Stocks enjoyed a positive finish to a tough quarter, as the S&P 500 gained 1.91 percent yesterday but was still down -6.44 percent for the quarter. It was the worst quarter for most markets since 2011 during the first phase of the European debt crisis. Somewhat surprisingly, markets shook off weak purchasing manager data from Chicago and the onset of Russian airstrikes in Syria. Some investors believe that more stimulus… Read More
When we look at our financial planning model, a lot of clients say something like, ‘well, I’m never going to make it that long anyway.’ According to Society of Actuaries, more than half of Americans underestimate their life expectancy and that their financial planning time horizons are too short. When asked how long a person their age and gender was expected to live, 40 percent of respondents gave answers that… Read More
One of the interesting market developments so far this year is the relative performance of momentum versus value in large cap stocks. Earlier this year, I wrote a primer on each strategy (found here and here) and at the end of the momentum article, I pointed out that value and momentum work especially well together. While both strategies have enjoyed higher returns than the overall market, they do so at different times, which… Read More
Watching the bottom fall out for oil prices is really one of the most dramatic things that I’ve witnessed in several years. Thankfully, it hasn’t had too much direct impact on us because we don’t have straight exposure to commodities, click here for the details on why we’ve avoided commodities). Of course, we’re all affected by the price drop. The good news is easy to remember because I get a reminder every… Read More
I think you know by now that I love charts. I am definitely not saying that I am a chartist – I don’t think I have ever made an investment decision for me or anyone else based on a chart. I simply think that if a picture tells a million words then a chart must at least tell 1,000 (roughly matching my wordcount) When I saw a blog titled ‘econompic,’… Read More
After reading my article last week (that can be found here) that discussed how we use limit orders to protect us from wild price fluctuations (among other reasons), one of my favorite readers wanted to know why we don’t use stop-loss orders. A stop-loss order is different from a market order, which says ‘do my trade at any price’ and a limit order, which says ‘do my order at a… Read More
In last week’s market turbulence when the Dow Jones Industrial Average (DJIA) fell by 1,100 points in a single day, I had to talk about something that I don’t like talking about: the DJIA itself. For the most part, I’m able to avoid talking about the DJIA, which is nice, because I think the index is pretty much an almost worthless relic of history. That said, when markets are volatile and… Read More
