The Keys to Effective Budgeting: Autonomy and Automation
Most people avoid budgeting because they consider it an exercise in repressive tedium. But it doesn’t have to be. By applying the science of motivation, economic evidence and the art of creativity, the apparent boredom of budgeting and saving can...
Stunning Odds Doom Your Returns
Few investors understand the stunning odds that are likely dooming their returns. The system is rigged against investors and in favor of those who “manage” their money. Mutual fund families, brokers and insurance companies are the big winners in this...
The Hidden Provision in the Department of Labor’s Proposed Fiduciary Rule
The “best interest contract exemption” has profound ramifications for retirement plan participants. In its proposed rule requiring that all advisors to retirement plans act as “fiduciaries,” the U.S. Department of Labor includes a “best interest contract exemption.” In my view,...
The Stunning Odds That Can Doom Your Returns
Few investors understand the stunning odds that are likely dooming their returns. The system is rigged against investors and in favor of those who “manage” their money. Active mutual fund families, brokers and insurance companies are the big winners in...
Speaking the Language of Risk
When I say “risk” and you say “risk,” chances are high we don’t mean the same thing. The finance industry defines risk as something measurable. It is variability within a set of known limits. You may have heard it referred...
Anomalies Can Mean Alpha
Since the development of the capital asset pricing model (CAPM) about 50 years ago, academic researchers have documented several hundred “anomalies” that generate a significant positive alpha. There are now so many that professor John Cochrane referred to them as...
Scale Works Against Active Skill
An overwhelming body of evidence clearly demonstrates that past performance isn’t prologue, which presents a problem for investors who believe active management is the winning strategy. Without the ability to rely on past performance as a predictor, there is really...
An Investment Lifeboat Drill Now Can Help Weather Future Disaster
Calm water makes a lifeboat drill much easier. We aren’t fighting the waves or the fear we feel during an emergency. Still, if the worst happens, and the drill becomes reality, at least we’ve rehearsed. We’ll know exactly what we...
Diversify Globally To Limit Risk
Diversification is often referred to as the only “free lunch” in investing because, when done properly, it allows investors to improve risk-adjusted returns. This principle applies not just to diversification across U.S. stocks, but to investing globally. The choice to...
Active Arguments Disproved
A reader asked me to comment on a recent Forbes article titled “Active Versus Passive Management: Which Is Better?” The author, contributor Peter Andersen, asks this question while observing that, in 2014, the vast majority of active fund managers underperformed...
