General

The Power of Diversification

For many US investors, the “base case” for equity investing is US large cap stocks, most commonly benchmarked as the S&P 500. You could absolutely do far worse than owning these 500 great US companies, and the weight of the evidence suggests that most actively managed mutual funds that benchmark themselves against the S&P 500…

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What’s Wrong With Your 401(k)? (If anything)

There currently are over sixty million Americans that are active 401(k) participants, and well over 500,000 total active 401(k) plans offered by employers in the United States.  Despite these high numbers, usages could be higher, as the US Census Bureau estimates that only 41% of all employees with access to a 401(k) plan utilize it,…

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Systematic vs. Discretionary Investing

Much of the discussion in finance is about “active” vs. “passive”. Active management typically uses security selection and/or market timing to make portfolio management decisions. Passive management typically does not, instead, focusing on market risk premiums as the source of expected return. So which is better? I personally think it’s the wrong question to ask,…

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Quantitative Analysis: It’s (Not) All About The Numbers

I’m a big fan of the work of Cliff Asness and AQR (Applied Quantitative Research).  Cliff was recently on Bloomberg Radio with Barry Ritholtz. You can listen here to his Feb 21st interview. About twelve minutes in Barry asked Cliff what it means to be a quantitative investor in which Cliff replied that “quantitative investment managers are…

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Thinking in terms of decades

Peak to valley, from June 1998 – March 2000 Warren Buffett’s Berkshire Hathaway lost over 50%. In the same period, the S&P 500 returned over 45% and the Nasdaq 100 returned over 315%. A new client said to me the other day “I’m in this for the long term, but if after a couple years…

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Why Simple Isn’t Easy

Living through a track record is very different than viewing it on paper. Even the most efficient track records in history have periods where they would have been very uncomfortable to stick with. Warren Buffett has had multiple 30-50% drawdowns in his career. In the world of indexing, there is nothing magical about the S&P 500. Yet…

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