Two of America’s eminent investment researchers were recently asked whether the hyperactive markets of the last few years indicate that the concept of buy-and-hold investing is outdated. Their answer? Absolutely not, reports the Journal of Indexes in its May-June issue. “Obviously, it would be much better if we knew when the market was going to go down 40 percent, and we could […]
Every investor’s choice: Be the dumb money or the smart money
Investors have a lot of choice when deciding how to handle market fluctuations. Many opt for “tactical asset allocation”—in other words, they move out of stocks, for example, when they think returns will be bad, and move back in when they expect better returns. Many others choose a better strategy—they spread their money among a bunch of different asset classes […]
Client Letter – Q1 2011
During the past quarter, U.S. stocks and real estate performed exceptionally well, followed by moderate returns internationally. Short and intermediate bonds remained flat. Isn’t it interesting that U.S. and international stocks performed so well, despite the havoc caused by the earthquake and tsunami in Japan? The following chart shows the 1-year, 5-year, and 10-year performance of many DFA funds (representing […]
It takes more than a million to make the rich feel wealthy
What does it take to feel wealthy? About $7.5 million, according to a group of people who should know. That finding came in a recent survey of 1,000 millionaire households by Fidelity, the second-largest mutual fund company. The average wealth of the households surveyed was $3.5 million, and surprisingly some 42 percent of those respondents said they do not feel […]
International stocks still offer diversification benefits
A long-held axiom among professional investors says that diversifying a portfolio by adding international stocks helps to reduce risk and enhance returns. But as the world’s developed economies in Asia and Europe have become more tightly entwined, critics have argued that global investing’s allure has declined because stock market patterns in major markets have converged. Rex Sinquefield, who helped develop […]
Market historians say this bull market is for real and will last
Stock markets worldwide have been rallying for nearly two years now. The Standard & Poor’s 500 Index hit a low of 676 on March 9, 2009 and has risen ever since. In late February it was in the 1330 range. Yet the average investor doesn’t seem to trust the trend, and plenty of professionals are skeptical as well. Worries over […]
Client Letter – Q4 2010
Over the past year, worldwide markets continued the strong recovery that started in 2009. US stocks turned in pleasing results with investors earning significant rewards for the equity, small cap and value risk factors. But capturing the market rate of return required plenty of patience: eight months into the year, the S&P 500 Index was still down 5.8% and the […]
Client Letter – Q3 2010
During the past quarter, we have witnessed an amazing 3-month rebound, in stark contrast to what happened in the prior quarter. In fact, the month of September will go down in history as the strongest September since 1939. The following chart shows the 3-month, 5-year, and 10-year performance of many DFA funds (representing different asset classes) compared to the S&P […]
Investing based on recent trends is an invitation to disappointment
As decision makers we spend a lot of time wallowing in the past. We project recent trends forward, expecting things will pretty much go on as they have been. Unfortunately, this tendency, termed “recency bias” by cognitive psychology, often does not give you a good guide to the future. Nowhere is this more true than in the investment markets. Here […]
Offered a high yield? Run the other way
Low interest rates at the bank and scary volatility in investment markets has created a market for shady high yield investment programs (HYIPs) that prey on unsophisticated investors, warns the Financial Industry Regulatory Authority, which regulates U.S.securities firms. If you or someone you know are offered a high yield investment that claims to provide safety, liquidity, and above-market interest rates, […]
