The Supreme Court of the United States has indicated an interest in deciding an important 401(k) case, Tibble v. Edison International. If the Supreme Court decides to hear the Tibble case, and if it decides it in a manner that will benefit investors, the impact could be profound. Before discussing the issues at play in…
It’s unfortunate that most of what passes for financial news is misleading and harmful to investors. It consists of supremely confident “financial gurus” predicting the future. They are either warning us of an imminent crash or observing that a bull run is just beginning. We are inundated with conflicting recommendations about the value of commodities,…
“Trouble. Trouble, trouble, trouble, trouble.” Reading all the news about Bill Gross and PIMCO, I keep hearing that Ray LaMontagne song in my head. (Go ahead—give it a listen while you read this, just for fun.) The king of bonds isn’t yet abdicating the throne, but it’s been a rough stretch since PIMCO came down from the mountain…
You know what has to be done, but it doesn’t make it any easier. You’ve done all the research, asked all the questions and mulled over your options, and you know that moving on from your current company is the right thing to do. You wince, imagining the look on the face of your boss…
A couple of weeks ago, I got an email from someone living nearby who wanted to talk about his investment plan. We arranged a time to meet, and I got to spend an hour being a sounding board. It didn’t take long to discover that he was making a common mistake. It’s one I’ve made,…
Do you consider yourself an investor or a trader? The answer matters because there’s a big distinction between the two. It’s also an answer that will help you make sense of the current sideshow entertaining most of Wall Street: Michael Lewis’s latest book, “Flash Boys: A Wall Street Revolt.” Starting on Sunday with an interview on “60…
It is our desire and intent to educate clients about how capital markets work and to provide them with the information necessary for their financial well-being. The advice to follow an evidence-based approach to investing is significantly different from most of the advice heard on Wall Street and in the financial media. It also…
Point 1: Markets Are Efficient Public information is of little fundamental value. New information is so quickly incorporated into asset prices that use of this knowledge cannot be expected to consistently yield superior risk-adjusted returns. Point 2: Risk and Expected Reward Are Related Investors who expect or need to achieve higher returns must accept…
Recently, I received an email from Russell Investments announcing that they had terminated several money managers and hired new ones. The funds that had changes in management were the Russell Emerging Markets Fund, the Russell International Developed Markets Fund, the Russell Global Infrastructure Fund, and the Russell Tax-Managed Mid- and Small-Cap Fund. Russell is one…
Earlier this month, the People’s Bank of China announced that it would double the allowable trading range for the yuan against the dollar to 2 percent from a midpoint rate it sets every day. This move provides evidence that the government is moving toward a more market-driven economy. I’ve noted that there’s a direct correlation between announcements…
In 1993, the Fama-French three-factor (beta, size and value) model replaced the single-factor capital asset pricing model (CAPM) and became the standard model in finance, explaining more than 90 percent of the variation of returns of diversified portfolios. While the model was a big improvement over the CAPM, it couldn’t explain some major anomalies. In…
Since the publication of the study “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency” in 1993, the momentum anomaly—buying past winners and selling past losers, generates abnormal returns in the short run—has received a lot of attention. This anomaly presents perhaps the greatest challenge to market efficiency, because it could not be explained by…
Many great discoveries come about by accident, like the discovery of the anti-malarial drug quinine, the smallpox vaccination, X-rays and insulin. Here’s a discovery that relates to retirement: the unexpected importance of marshmallows in explaining the difficulty of delaying gratification. A famous Stanford study by Walter Mischel, which took place in the late 60s and…
Approximately 51 million Americans have invested an estimated $3.5 trillion in 401(k) plans, according to the Investment Company Institute. If you’re one of them, you’re probably being ripped off, big time. How? Your plan likely includes a dizzying array of investment choices. These options are dominated by funds that have high management fees and are actively managed,…
Timothy Sykes is offering you an opportunity to make big bucks. According to his website, he turned $12,415 into more than $3.7 million by trading penny stocks. He represents the following “verified” returns: 2014 (year to date): 90 percent 2013: 66 percent 2012: 38 percent 2011: 54 percent 2010: 57 percent Mr. Sykes sells a trading system…