When we meet with clients to create or review a financial plan, there’s a section where we try to get a sense of risk tolerance. We’ll show an asset allocation and its long-term expected return, and then, in big red numbers, what this portfolio would have lost in the 2008 financial crisis. We show it in percentage and dollar terms, based on the portfolio size at that time. The idea… Read More
I listen to a lot of investment podcasts, and one of the ones I enjoy the most is Trillions, produced by Bloomberg. It stars two journalists, Joel Weber and Eric Balchunas (pronounced bal-chew-ness, as best I can tell), and a few other rotating cast members. I enjoy listening because the hosts are Generation Xers (like myself), who are funny and down to earth. They feel like friends who talk in… Read More
As noted above, the University of Michigan Consumer Sentiment index received much attention last week. The index is a monthly survey of at least 500 US households, who are asked about their current financial situation, economic expectations, and attitudes toward purchasing major household items. The consensus estimate for February was a reading of 63, which would have been a little lower than the January reading of 64.7. When the actual… Read More
The headlines have been volatile lately, leading to anxious calls from clients wondering if they should take action based on what they think might happen. If you want to make some changes at the margin, that’s probably okay, but a wholesale change at this moment probably says more about your political views than an unbiased investment outlook. When we set an asset allocation policy with clients, it’s usually in the… Read More
Last week, I said that I would broadly explain hedge funds, but I was distracted by their high costs. I promise to stay on point today. Hedge funds are pooled investment funds that are less regulated than other types of pooled vehicles like mutual funds and ETFs. They are less regulated because their clients are wealthier, which presumes them to be more sophisticated (I’m not sure that’s true, but that’s… Read More
We’re only 10 days into the new year, and markets of all stripes are off to a rocky start. I think people intuitively understand that stocks are volatile, and after two years of 20+ percent gains for the S&P 500, a small “give-back” isn’t so hard. Bonds are another story. Most people quickly admit that they don’t understand them very well but know they are supposed to be the “safe”… Read More
There are many articles about where markets ended in 2024 and where they might go from here. This isn’t one of those articles, but we will send our quarterly newsletter out shortly that does and will host an in-person event, our Investor Social, at the end of this month. One factoid I read was that it was the best two-year return for the stock market since the 1990s, or in… Read More
The late Thanksgiving and my usual Christmas-denial meant that I was surprised to see that this is effectively the last Insight for the year. Yes, I could send one on Christmas Eve and another on New Year’s Eve eve, but returns have been so good this year, that I thought we could all take a break and enjoy the holidays. Before I go, however, I thought I would show what… Read More
Over the last ten years, the oldest technology ETF I could find, the Select Spider Tech fund (ticker symbol XLK), has made more than 20 percent per annum through September 30th. A $10,000 investment in that fund would have been worth $64,172 at the end of last month. Even though I know better than to drive forward while looking out through the rearview mirror, I can’t help it: I want… Read More
An Arizona State professor, Hendrik Bessembinder, wrote a fascinating paper detailing something that we intuitively sense: a small handful of stocks have created almost all of the wealth over time, and most stocks don’t provide much in the way of returns. It’s one of the reasons we want hot tips (even when we know they aren’t likely to be hot). The paper’s provocative title is “Do stocks outperform Treasury bills?”… Read More
