War in the Middle East, a depressed economy at home, a three-year bear market: what should investors do in these highly uncertain times? Some investors jump out of stocks and head for the “safety” of fixed income investments or temporarily stop making investment purchases. Others hang on to their investments but agonize over fears of capital loss. These are probably […]
Do the stars hold the key to the stock market?
A large body of academic investment research indicates that technical stock market analysis has about as much credibility as astrology. Technical analysts use graphs and charts of prices and trading volume to make predictions about individual stocks, industry sectors, and the stock market itself. Although technical analysis is still widely practiced on Wall Street, academic research says the method rests […]
Passive investing works with small stocks too
Many professional investors and academic researchers have long believed that little is better when it comes to stock size. Research has shown that the smallest stocks tend to beat their larger brethren on a long-term basis. Although the reason for higher small stock returns has not been definitively established, some researchers believe higher returns are compensation for the extra risk […]
Bush Proposes New Savings Plans
President Bush has proposed sweeping changes in taxation of retirement and other savings. If enacted, his proposals could profoundly affect the way Americans save. It could also lead to major federal and state budget deficits in the future. The proposal is far more important to most working and retired Americans than is the proposed elimination of dividend taxation. Bush’s plan […]
New market definitions
Bad times usually bring out gallows humor, and the recent bear market was no exception. Various versions of funny Wall Street definitions have appeared on the Internet and in print publications. Here are a few: Market correction: The day after you buy stocks. Broker: What your broker has made you. Standard & Poor: Your life in a nutshell. Value investing: The art of buying […]
Best and worst months
Conventional wisdom pegs October as the worst month of the year for the stock market. It was in that month that the crashes of 1929 and 1987 occurred. But that wisdom is wrong: September has proved to be the worst month of the year, with the worst record over the past 50 years. The Standard & Poor’s 500 Index has […]
Don’t blow a big opportunity offered by the bear
Your portfolio has endured one of the worst bear markets of the last 100 years. As bad as things seem, investors may have been handed a once-in-a-lifetime opportunity. They shouldn’t blow it by becoming fixated on what’s happened to them. Unfortunately, investors frequently focus on what they paid for an investment, and fluctuations up or down from that initial price […]
Client Letter – Q4 2002
I hope that you enjoyed the holiday season! In order to start this year on a positive note, I thought that it might help if we look at 2002 with the proper perspective. The chart below shows annualized investment returns for the major asset classes over three periods—one year, five years, and ten years (all of which end December 31, […]
Active managers blow their chance to outperform
The past several years have given active investment managers plenty of opportunities to show that they can add value to the investment process. Recent studies have shown that individual stocks have become much more volatile than in the past, giving active managers a chance to demonstrate their stock-picking skills by picking winners and avoiding losers. In addition, large up and […]
Want to retire? Save until it hurts
The stock market boom of the 1990s did a great disservice to the average retirement investor: it made her feel that big stock returns were the key to retiring in style. From 1990 through 1999, big American stocks grew by an average of 18.2% per year, based on the Standard & Poor’s 500 stock index. A $50,000 investment in the […]
