Understanding how markets function is critical when making investment decisions. This is why Hendrick Bessembinder’s 2018 study of historical stock returns was so important; it revealed to investors that the vast majority of individual stocks underperform. This information is critical. It helps us better understand why active stock-picking managers underperform at such a high frequency, and it gives us a deeper understanding of the importance of portfolio diversification--not just to mitigate ... [Continue Reading]
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Research demonstrates that over the past 50 years, every U.S. recession may have been predicted ahead of time by using one simple indicator--the spread between short and long-term government bonds. Usually, long-term bonds offer higher yields than short-term bonds due to the additional risk that an investor assumes when buying bonds with longer maturities. However, every once in a while the dynamic flips, where short-term government bonds offer higher yields than long-term government bonds. This ... [Continue Reading]
There’s a classic line in the 1987 movie “Wall Street,” where Michael Douglas’ character Gordon Gekko states, “lunch is for wimps.” The implication is that in the business of money management, there’s no time to waste, certainly not for something as trivial as lunch. With only so many hours in the workday and a never-ending stream of new information to digest, the idea is that analysts and portfolio managers must spend every waking minute trying to gain an edge. This narrative is powerful, and ... [Continue Reading]
In 2017, the U.S. stock market rose steadily, with the S&P 500 recording a rare feat of 12 straight positive monthly returns. By comparison, 2018 has essentially been a splash of cold water in the faces of investors. After strong returns early in the year, the market has see-sawed back and forth, ending the first quarter with a slight loss. It’s important that we view this recent volatility with perspective and understand just how unusual the market environment was in 2017. Arjun Sigamani, a ... [Continue Reading]
IRA’s (Individual Retirement Accounts) are one of the most common ways to save for retirement. Conceptually, they are familiar to many, but the details related to and surrounding these types of accounts can be confusing. Many investors are also familiar with Roth accounts, which are a type of an IRA. This time of year, January thru April 15, is a critical time to understand IRA parameters since during that time you can address both tax years--2017 and 2018. In this article by Jim Glass of The ... [Continue Reading]