7 Oct 2015

Today’s Ugly Duckling is Tomorrow’s Swan

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

15 Apr 2015

Behavior Beats Strategy

In the past two weeks, I’ve written primers on two of the strategies that we use, over-weighting to small cap stocks and investing in cheap, value stocks. One of the Portfolio Managers here at Acropolis correctly reminded me that all of the best strategy in the world can be undone with poor investor behavior, so I thought I would try and put some numbers on that idea. To demonstrate how… Read More

21 Jul 2014

Money and Happiness

Any sensible person knows that you have to save money for the future. At the very least, you need to have money set aside for the so-called ‘rainy-day.’  If you don’t have a cushion, the consequence of a negative surprise can be a lot worse than if you have an emergency fund set aside. Do money and happiness go together?  Can saving actually make you happier?  I wouldn’t have thought… Read More

20 May 2014

Investors Keep Chasing Performance

One of the ways that investors hurt themselves is by chasing performance.  Unfortunately, many financial services organizations enable this practice by focusing on short-term performance. Recently, I saw some data that showed flows into mutual funds and exchange traded funds (ETFs) based on their Morningstar star rating. The chart is self-explanatory except for the columns labeled NR, which means ‘Not Rated.’  To earn a Morningstar star rating, you need at… Read More

10 Apr 2014

The Wisdom (and Madness) of Crowds

The 2004 book, The Wisdom of Crowds, by James Surowiecki, starts with a vignette about the famous British scientist Francis Galton set in 1906. In the story, Galton travels to the county fair and finds a weight judging competition, where the crowd could wager on how much a fat ox weighed.  For a sixpence, people could write down their wager and the closest person one a prize (but not the… Read More