The reason we put our assets at risk by investing is that we are all seeking an outcome. The outcome is the reason we start investing, what matters when we’re done, and what we worry about the entire time in between. But Barry Ritholtz, in Outcome or Process- what investment focus succeeds over time?, sheds some light on what is actually important: the process. Having a process orientation can only increase your chances of a successful outcome, whereas focusing on a successful outcome and ... [Continue Reading]
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In The Arithmetic of Active Management, William Sharpe does a fantastic job of taking a very complex issue and breaking it down into its two most fundamental problems. He uses only the most basic elements of math to show that passive investors will always outperform the average active investor. William Sharpe is a Nobel laureate, creator of the Sharpe Ratio, and major contributor to the development of the capital asset pricing model. ... [Continue Reading]
As another tax season comes to an end and Americans square up their business with Uncle Sam, we wanted to take a moment to step back and see what purpose tax dollars actually serve. Derek Thompson of The Atlantic has aggregated some interesting charts and graphics to show what we are paying for, how we are paying, who is paying, and how these things have changed. If you would like to alleviate that unknowing feeling as you sign your check (or await your refund) take a look at How America Pays ... [Continue Reading]
With the very public release of Michael Lewis’s new book, Flash Boys, much debate has been spurred about high frequency trading (HFT). As is often the case with issues that affect our bank accounts, it is easy to find pundits weighing in from both sides. With all of the debate, the cost is pretty minor, especially in a lower trading volume strategy that is inherent to a passive approach to the market. Even Michael Lewis warned against overreacting when discussing avoiding HFT by avoiding the ... [Continue Reading]
We know two things for certain when it comes to the stock market. The first is that, eventually, the market will go down. The second is that when there seems to be a new pundit on the scene each week, claiming the market will go down, one of them will eventually be right. As you read the sky-is-falling headlines that plague financial news and consider what this means for your portfolio, keep in mind that you would be better off consulting the wisdom of a penny and not reading these articles at ... [Continue Reading]