22 Sep 2025

We Need New Words for an Age-Old Debate

Perhaps one of the longest-running debates in the investment industry is the so-called “active vs. passive” debate. Most people understand it this way: Will active managers who pick stocks (or bonds) fare better than index funds? The industry of stock-pickers says yes; the index fund companies say no way. The name “passive” is just terrible. It sounds like nobody is doing anything, when in fact index investing is a reflection… Read More

By David Ott Tags: , , , , , ,
9 Oct 2023

Active Passive Word Play

I think that most people in the investment business have at one point, or another wrestled with the question about whether the market is efficient and what you should do about it, regardless of your answer. In simple terms, an efficient market quickly incorporates news and information into prices. It’s easy to find examples of market inefficiency, like when companies added .com to their name in the late 1990s and… Read More

By David Ott Tags: , , , , , , , , , ,
11 Sep 2023

Stock Bond Correlation Changes Aren’t Concerning

Every investor suffered losses last year because the two most basic investment building blocks, stocks and bonds, both lost value. Many of the investment community’s intelligentsia are in a twist because the correlation between stocks and bonds is now positive for the first time in two decades. They say, full of sound and fury, that bonds offer less diversification now that the correlation is positive. My goal today, without getting… Read More

By David Ott Tags: , , , , , , ,
7 Jun 2021

Drawdowns in Retirement

This past week, I was meeting with a client and the discussion turned to the low yield bond environment. The client has a pretty common question – isn’t there something that yields more? The answer is yes, there are a lot of things that yield more than the investment-grade bond market. We could buy junk bonds, emerging markets bonds, or other questionable issuers. These kinds of bonds aren’t inherently bad,… Read More

By David Ott Tags: , , , , , , ,
18 Mar 2019

Risk & Volatility

Using the words ‘risk’ and ‘volatility’ interchangeably is one of the bad habits of many financial professionals, myself included.  When pressed, we know better, but we make this mistake all of the time nonetheless. Merriam-Webster has four definitions of risk as a noun, two of which are applicable here: ‘the possibility of loss or injury,’ and ‘the chance that an investment (such as a stock or commodity) will lose value.’ Volatility, according to Merriam-Webster,… Read More

By David Ott Tags: , , ,
25 Feb 2019

When Warren Buffett Speaks, I Listen

Every year, the investors and the financial media eagerly await Warren Buffett’s annual letter to shareholders, and this year was no exception. I didn’t start reading them until four or five years ago, although I once read book that reorganized his letters by topic rather than chronology.  Each year, I like to think that I’ll go back and read his letters, which can be found here, on Berkshire’s hilariously antiquated website – but I… Read More

By David Ott Tags: , , , , , ,
11 Feb 2019

Why Bother with International Stocks?

According to data from Dimensional Fund Advisors (DFA), the value of the US stock market at year-end was worth $28.1 trillion – about 55 percent of the market value for all of the world’s stocks, which totals $51.2 trillion. Developed international stocks are worth $17.4 trillion in aggregate (34.0 percent), and emerging markets stocks are worth $5.7 trillion (11.0 percent). In theory, passive investors should allocate their portfolio accordingly. In… Read More

By David Ott Tags: , , , , ,
12 Mar 2018

Busting Another Wall Street Myth

Over the last few months, I’ve read multiple articles making the claim that the correlation between stocks and bonds is shifting and that the new relationship will negatively impact portfolios. One recent Bloomberg article, titled ‘Easy Allocation Models ‘Doomed’ as Diversification Breaks Down’ really set me off and caused me to take a closer look at some of these claims. The thrust of the claim is that the recent negative… Read More

By David Ott Tags: , , , , , ,
11 Dec 2017

Efficient Markets Fact and Fiction

For almost 50 years, one of the most controversial ideas in finance is that markets are efficient, as presented by Gene Fama’s Efficient Market Hypothesis (EMH) in 1966. Let’s start with a simple definition of EMH: Current market prices incorporate all available information and expectations and are the best approximation of intrinsic value. In some ways, it’s such a simple statement that it’s a little surprising that it’s so controversial…. Read More

By David Ott Tags: , , , ,
9 Jan 2017

How Long is the Long Term?

One of the tried and true tenets of successful investing is taking a long-term perspective. Warren Buffet says that his favorite holding period is forever.  He doesn’t always hang on that long, but still recommends that you should ‘only buy something that you’d be perfectly happy to hold if the market shut down for 10-years.’ Regarded academic Jeremy Siegel wrote the buy and hold bible, titled ‘Stock for the long run,’… Read More

By David Ott Tags: , ,