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...
Three Crucial Lessons for Weathering the Stock Market’s Storm
August 26, 2022
Investors can always expect uncertainty. While volatile periods like the one we’re experiencing now can be intense, investors who learn to embrace uncertainty may often triumph in the long run. Reacting to down markets is a good way to derail progress made toward reaching your financial goals. Here are three lessons to keep in mind...
Looking Back at When the Markets Appeared to Be Ahead of the Fed
August 19, 2022
The US Federal Reserve announced Wednesday, June 15, its decision to raise the federal funds rate by 0.75%, the largest rate hike in nearly two decades. The market’s response? US Treasury yields actually fell slightly compared to the curve’s position on June 14. This is not to suggest bond markets shrugged off the Fed’s actions....
The Continuing Case for Investing in Emerging Markets
August 10, 2022
It’s no wonder investors are questioning the place of emerging markets in their portfolios: Emerging markets stocks have underperformed US stocks in eight of the last 10 calendar years,1 and Russian stocks plummeted and were pulled from all major indices in the first quarter of 2022.2 Because markets in developing countries make up a meaningful part...
History Shows That Stock Gains Can Add Up after Big Declines
August 5, 2022
Sudden market downturns can be unsettling. But historically, US equity returns following sharp declines have, on average, been positive. A broad market index tracking data since 1926 in the US shows that stocks have tended to deliver positive returns over one-year, three-year, and five-year periods following steep declines. Cumulative returns show this trend to striking effect,...
Don’t Let Talk of Market Cycles Take You for a Ride
July 29, 2022
Investors can be both motivated and well-equipped to see patterns in stock returns. Motivated, because successfully predicting market movements can be lucrative, and well-equipped, because evolution has programmed humans to err on the side of seeing patterns even when they’re not present.1 Many investors believe markets to be cyclical and search for signs of cycle status...
Singled Out: Historical Performance of Individual Stocks
July 22, 2022
Many investors end up holding large concentrated positions in single stocks, whether as the result of employee compensation or a handsomely rewarded stock selection. Familiarity with these stocks or a successful track record while holding them may discourage investors from diversifying. Unfortunately, this can lead to one of the most well-known cautionary tales in finance:...