As our nation's largest generation begin to enter retirement, a lot of discussion has been had about what effect this retirement boom might have on domestic stock prices. Vanguard uses logic and common sense to dispel some of the more popular talking points in their infograph, Baby Boomers and Equity Returns. The bottom line -- "numerous factors influence long-term stock returns, and, historically, demographics have contributed only modestly." ... [Continue Reading]
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Every year, DALBAR, Inc. releases a study showing the difference between investment returns and investor returns. Investment return is the return of a specific investment over a specified time period. Investor return is the actual return of the average investor in that same investment over that same time period. The difference between these two numbers is what Carl Richards famously refers to as the “behavior gap.” Sean Hanlon, a Forbes Magazine contributor, describes this effect in more detail ... [Continue Reading]
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]
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]