Tag Archives | diversification

1-Minute Video: Protect Your Portfolio With Diversification

Please enjoy this 1-minute video (for those receiving this by email: please click on the blog title line above to view). Diversification and allocation are NOT the same thing, as I explain briefly in this post “Diversification explained simply.” Only a few, a small number, of firms actually apply the mathematics of diversification. They pay […]

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Businessman reading newspaper at coffee shop

Record highs (at anytime) means what exactly?

With stock indices continuing to set new highs, does this mean negative returns for stocks are on the horizon? If prices increasing over time was a troubling development, what would be the point of investing at all? You would think investors would realize there is no potential for future gain, and not invest. So why do […]

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StockSnap January UMIOY6CVUM

As Goes January, So Goes the Year?

As investors ring in the new year, some may see the occasional headline about the “January Indicator,” “January Barometer,” or “January Effect.” This theory suggests that the price movement of the S&P 500 during the month of January may signal whether that index will rise or fall during the remainder of the year. So every […]

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The cost of indexing – and an approach how to reduce those costs

There is a cost to indexing that most investors are unaware of. It is called “reconstitution.” What is reconstitution and how may the costs involved be solved? What is an index? An index tracks changes in the markets – think of it kind of like a weather barometer. The first article below discusses how the reconstitution effect […]

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What about those Target Date Funds?

Target Date Funds (TDFs) – either you love them or you hate them. If you lack any tools within your 4o1k, or don’t want to use a qualified adviser, then I guess they’re better than nothing. However, they’re as arbitrary as where the International Date Line (IDL) is … more on arbitrary later in pros and cons … […]

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The Cost of a Perfect Market Timing Strategy

I recently read a Dimensional study* by the same name. “What if we could construct a strategy with a correlation close to 1 with a perfect market timing strategy? Can we estimate what its returns would have been? Can we use these estimates to understand what the market would have “charged” for a perfect market […]

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The “skittles chart” of country returns & country market sizes

Last week I discussed a skittles chart (periodic table of investment returns) for common indexes and broad asset class returns. Below you will see how returns of various countries compare year by year for both developed and emerging markets. From dfa matrix book us_2015 from Better Financial Education Yes – it is hard to see specific […]

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Investment Philosophy

Index Funds Anchor Your Portfolio

Index funds often earn higher returns than the average actively managed mutual fund. What’s their secret? The differences between retail index funds and actively managed funds are discussed below. The article does not discuss a more broadly defined index that Dimensional (DFA) has developed. Retail indexes, as the article discusses, are defined by an investment […]

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Dimensional’s Disciplined Approach Earns It a Top Mark by Morningstar

Morningstar recently issued a new Stewardship Grade for Dimensional. The firm’s overall grade—which considers corporate culture, fund board quality, fund manager incentives, fees, and regulatory history—is an A. Dimensional morningstar stewardship from Better Financial Education In the interest of disclosure: I do use DFA sub-managed SA Funds with most clients (not a fund requirement, but a […]

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shrinking alpha

“The Incredible Shrinking Alpha” – a brief review

The ability to beat the market returns is shrinking. This ability is measured by a statistical term called “Alpha.” Swedroe and Berkin’s book “The Incredible Shrinking Alpha” discusses how Alpha has shrunk, as well as the ability to repeat this feat, called persistency, is low too. What is Alpha? The ability for a manager to […]

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