Go Global for Diversification That Travels Well
November 18, 2022
This blog was written by Dimensional Fund Advisors. Learn more about Dimensional Fund Advisors here. The original post was published on September 13, 2022 and can be found here. US-based investors may believe they know America best. Accordingly, they are liable to put the bulk of their investments in stocks and bonds of US-based companies...
Liquid Alternatives: Panacea, or Just a Pain?
November 11, 2022
In the face of broad equity and fixed income market downturns, some investors may be tempted by the siren call of alternatives. These investments may include liquid alternatives, or “liquid alts,” a subset of fund and ETF investments that offer easier-to-access exposure to alternative strategies while enticing investors with claims about higher potential returns and...
Active Management Hasn’t Shined in Volatile Markets
November 4, 2022
Many investors have likely heard the adage that active management performs better in times of market turbulence. This may sound like an emotional hedge for market stress akin to betting against your favorite sports team to balance an adverse outcome with financial compensation. However, a historical analysis of active US-domiciled equity funds finds no meaningful...
Single-Stock ETFs: The Worst of Both Worlds?
October 28, 2022
Investors awaiting ETFs with as few stocks as possible are in luck: Single-stock ETFs have arrived on the scene, providing leveraged or inverse exposure to individual names such as Tesla, NVIDIA, Nike, PayPal, and Pfizer. While some investors may want greater exposure to their favorite companies or to express bearish views on their least favorites,...
Expectations vs. Reality in Value Funds
October 17, 2022
Value is an asset class, not an investment strategy. Identifying low relative price stocks is only one step toward designing and managing a value strategy; differences in managers’ implementation skill can lead to a wide range of outcomes experienced by value investors. Investors can evaluate these outcomes by assessing whether managers delivered what they said...
Making Cash Flows Count
September 27, 2022
When you go grocery shopping, do you typically purchase every single item consumed in your household, regardless of your current supply? Or does your shopping list tend to focus just on items you need to replenish? If you fall in the latter camp, you a) are less likely to have five jars of mayo in...
Chasing High-Flying Stocks Risks Meme Reversion
September 23, 2022
“Making money slowly is much better than making—then losing— money quickly.” —David Booth As the pandemic dragged on, many people’s hobbies included baking sourdough bread, binge watching Tiger King, and day trading certain meme stocks. With “stimmies” (stimulus checks) in hand, commission-free trading platforms widely available, and an abundance of time to spare, retail investors opened...
Does [fill in the blank] Belong in My Portfolio?
September 16, 2022
Financial innovation provides investors with a seemingly endless supply of new investment options. But the process of evaluating the merits of these investments remains the same even as the names change. Adopting a new component in one’s asset allocation represents a tradeoff that should carefully balance the expected benefit vs. the cost of its inclusion. The...
What Happens When You Fail at Market Timing
September 9, 2022
The impact of being out of the market for just a short period of time can be profound, as shown by this hypothetical investment in the stocks that make up the Russell 3000 Index, a broad US stock market benchmark. A hypothetical $1,000 investment made in 1997 turns into $10,367 for the 25-year period ending...
Beware the Hidden Costs of Indexing
September 2, 2022
Imagine ringing in the new year in New York City’s Times Square with a million of your closest friends. Shortly after the ball drops, everyone is ready to leave—at the same time. Demand for a ride in that area soars, and so does the price for the suddenly coveted service. This dynamic surge is a...