Don’t get blown off course by a windfall
So you’ve experienced a financial windfall and you don’t know what to do with it. This is what we refer to as a “luxury problem,” right? Indeed, you’d think this would be the most glorious dilemma possible to befall you...
Asset Allocation Guide: How much risk do you need?
The first two posts in our series on asset allocation focused on investors’ ability and willingness to take risk. Today, we turn our attention to the third of our three tests, the need to take risk. The need to take risk is determined by...
Asset Allocation Guide: Dealing with conflicting goals
Today we conclude our series on how best to make asset allocation decisions. It’s an easy decision when the analysis of your ability, willingness and need to take risk leads to the same conclusion. For example, one can have a high ability and willingness to...
Reversion To The Mean Phenomenon: Part IV
This final post of the RTM series will explore the importance of discipline. The academic evidence demonstrates that the determinant of almost all of the risk and return of a portfolio is its asset allocation. It’s important to add that because of...
Reversion To The Mean Phenomenon: Part III
Our last post looked at the issue of what is expected to happen as a country migrates from frontier to developed markets. We should expect to see the cost of capital fall in such a country. Among the reasons is that regulatory...
Reversion To The Mean Phenomenon: Part II
My prior post explored the ninth wonder of the world: reversion to the mean. Today, we continue the discussion on this phenomenon. Forecasting stock returns is a more difficult task than forecasting bond returns. While the relationship only holds at long horizons,...
Reversion to the Mean Phenomenon: Part I
The Seven Wonders of the Ancient World is a list of remarkable constructions of antiquity. They are the Great Pyramid of Giza, the Hanging Gardens of Babylon, the Temple of Artemis at Ephesus, the Statue of Zeus at Olympia, the...
The Dividend-ETF Trap
Over the last few years we’ve seen a dramatic increase in interest in dividend-paying stocks. The heightened interest has been fueled by both the media hype and the current regime of interest rates that are well below historical averages....
Faint Praise For 130/30 Funds
Hedged (long/short) mutual funds are the money management industry’s answer to illiquid hedge fund strategies. The premise of long/short funds is that the managers can apply their security-selection skills to a broader opportunity set, which is to say they can...
The Secret to Picking Actively Managed Mutual Funds
If you are a regular reader of my blog, you know I recommend against buying anyactively managed mutual fund. Instead, I advise investing in a globally diversified portfolio of low-management-fee index funds, passively managed funds or exchange-traded funds (ETFs), in an...
