Millennials, also known as Generation Y, are an interesting group of people. The term typically refers to those born between the early 1980s and 2000. The general perception of this generation is mixed. Some articles portray them as selfish, lazy and entitled. Others report they have a community spirit. A study published in 2012 in…
In my book, “Think, Act, and Invest Like Warren Buffett,” I noted that the Oracle of Omaha advised investors: “We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept…
To really help people, financial planners have to delve into the the feelings and emotions that drive their clients’ financial decisions. One planner explains why that’s so hard. While most of us financial advisers want to do the best for our clients, we often struggle at the task. The main problem, as I recently wrote:…
As a continuation of our previous discussion earlier this month on small value mutual funds, today I’d like to review the metrics of some popular small value ETFs. As a reminder, the smaller and more “valuey” the stocks that a fund owns, the higher the expected returns of the portfolio are. The following table, with…
An algorithm is defined as a set of detailed instructions that result in a predictable end-state from a known beginning. The discovery of an algorithm that would consistently generate outsized returns would be the holy grail of investing. The individual who came up with such an algorithm and published the methodology in a peer-reviewed journal…
I recently went backpacking in the Uinta Mountains. It’s a range of gorgeous peaks close to my home in Park City, Utah. A group of friends planned to spend a few days in the backcountry, so we got together to discuss everything we’d need for the trip. We had a lot of experience hiking and…
Q: Can you capture higher returns on a municipal portfolio by lowering its credit quality? A: Investors generally demand a higher yield when purchasing lower-credit-quality municipal bonds due to their greater risk. The assumption is the greater the risk, the greater the expected return. However, evidence has shown that investors have not realized higher risk-adjusted…
All across America, a familiar ritual is repeated at least quarterly. Sponsors of 401(k) plans meet with their brokers, insurance companies or other advisers. The purpose of the meeting is to decide which funds to keep as investment options and which ones to eliminate. Everyone has a familiar role. The plan adviser comes prepared with…
A regular reader sent me the following email: “If you get the chance, I would appreciate you including a piece about whether the Franklin Templeton Developing Markets (TEDMX) fund adds value. Its manager, Mark Mobius, is always quoted as the guru and pioneer of emerging markets investing. Does he do any better than a passive…
Despite the fact that financial theory has long held that dividend policy should be irrelevant to stock returns, one of the biggest trends in recent years has been individual investors rushing to buy dividend-paying stocks. In some cases, it’s a substitute for safer, but lower-yielding bonds. In others, it’s because investors believe dividend-paying stocks are…
“I’m bored.” You’ve said it. I’ve said it. Your children or nieces or nephews have said it. Our usual response to these two little words is to recommend doing something about it. You tell children to go outside. You pick up a new book or go to the movies. I head out on my mountain…
Until the recent sell-off toward the end of July, yields on high-yield bonds had been hitting record lows. At the end of June 2014, the yield on five-year bonds rated BB—the credit rating just below investment grade—was only 4.3 percent, or about 2.7 percentage points higher than the yield on five-year Treasurys. That puts the…
There have been a number of articles over the past few years claiming to refute the existence of a small-cap (or size) premium, which is the historical difference in returns between small-cap stocks and large-cap stocks. While the critiques have been somewhat varied, two common claims are that the risk-adjusted returns of small-cap stocks have…
When interest rates are low, some investors stretch for yield by taking on credit risk. At the same time, many investors are also seeking alternative ways to protect themselves against a potential rise in interest rates, without sacrificing that hard-earned yield. These dual concerns have led many to consider bank loan funds, which recently have…
It’s not too late to make some summer reading recommendations, and a quick review of my bookcase turned up some titles I think would be valuable for any investor. These books cover topics ranging from a detailed explanation of how the markets really work to the basic benefits of financial planning and some of the…