26 May 2015

Quality Investments Over Quantity Investments

In recent months, I’ve been working to create a set of ‘primers’ that describe certain market factors that we pursue in our strategy in hopes of increasing returns, lower risk, or, in a perfect world, doing both. So far, we’ve looked at three equity factors: size (small companies tend to outperform large companies), value (cheap companies tend to outperform expensive companies) and momentum (stocks that have recently outperformed/underperformed are likely… Read More

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15 May 2015

The Trouble with Hedge Funds

Yesterday, in my article about activist investors, I referred to a Yale academic who said that one hedge fund index showed that activists had sluggish performance, but then said that this index series is widely known to be troublesome without any explanation for what makes them problematic. Hedge fund ‘indexes’ are well known to overstate performance and understate risk, making them appear more appealing to investors than they really are.  The… Read More

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15 Apr 2015

Portfolio Insights

We are pleased to provide a digital copy of Portfolio Insights, our quarterly newsletter. Table of Contents: The Trouble with Forecasting Inside the Economy Stock Market Summary Bond Market Review Choosing a Trustee Best Execution for Clients Click here to read this issue: 2015 Q1 Portfolio Insights

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10 Apr 2015

To Hedge or Not to Hedge

For the most part, the returns associated with foreign stocks and bonds have two components: the return of the stock or bond and, secondly, the return of the foreign currency.  Over the past eight months, the impact of the exchange rate has been unusually high.   For example, a German investor that owns an index fund in the DAX is up 24.04 percent so far this year through yesterday.  For… Read More

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8 Apr 2015

Are Markets Getting More Volatile?

I’ve had the feeling recently that stocks were more volatile than usual.  As funny as this may sound, I don’t trust my own gut at all.  Despite its size, my gut is no better than anyone else’s at creating hunches that are worth a darn, so I turn to data frequently. To address my intuition, I did a quick check of the average volatility for the first quarter compared to… Read More

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12 Mar 2015

What Corporate Bond Yields are Telling Us

It should not come as a surprise to anyone that markets have performed very well over the past five years. The S&P 500 has earned 16.12 percent per year in the five years that ended in February. Few investors realize that corporate bonds have also done very well over the past five years. For the five years that ended in February, the Barclays US Corporate Bond index has earned 6.22… Read More

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18 Feb 2015

Mutual Funds: Decisions, Decisions..

In a recent issue of one of our industry trade ‘rags,’ the following chart really caught my eye: The chart shows the number of mutual funds by category in the US, according to Morningstar. It’s hard to read, but back in 1990, there were 665 US stock funds, 123 non-US stock funds, 481 taxable bond funds and 686 funds that fall into the ‘other’ category (I am guessing that they… Read More

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11 Feb 2015

Black Box Investing

I am a big fan of quantitative investing, although that term is often misapplied in my judgment, so let me define what I mean by that term. When I say quantitative investing, I am simply referring to a process driven approach to evaluating securities and making decisions. ‘Quant’ investors typically rely on computers to organize and evaluate data that serves as input in the decision making process. The financial press… Read More

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10 Feb 2015

The Wrong Kind of Diversification

Some kinds of diversification are better than others. Legendary investor Peter Lynch often referred to corporate ‘deworseification’ back in the conglomerate days when companies like ITT owned businesses as varied as hotels, insurance, defense contracting and for-profit education. One kind of diversification that Morningstar has popularized, but that I don’t think is particularly useful, is diversification by style box. As you can see in the image, Morningstar has cut the… Read More

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6 Feb 2015

Investing Made Simple

In finance, the value of any asset is the present value of all of the future cash flows. When someone first told me that, I had no idea what it meant, so let’s run through a quick example. Assume that someone asks you to borrow $100 for one year. If you think inflation might be three percent in the next year, you’re going to need to charge a three percent… Read More

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