Why Artificial Intelligence Won’t Fundamentally Change Investing

By Jack Forehand (@practicalquant) —  Artificial Intelligence is going to change the world. It already has in many ways. But its best days are still ahead of it. So many industries, ranging from technology to healthcare to manufacturing, will experience huge benefits from its vast potential. Investing is one of the areas AI might have the most impact. There are a myriad of uses for AI in investing, and almost all of them will be big… Read More

Become an Equity Compounder à la Buffett

By John Reese (@guruinvestor) —  It’s a simple concept but, over time, it accomplishes extraordinary things. That’s how legendary investor and stock market guru Warren Buffett has described compound interest, a concept that Albert Einstein called the “eighth wonder of the world.” The idea is simple: If you invest even modest amounts of money at modest rates of interest and leave it invested over long periods of time, it can grow exponentially–since the interest you earn each year… Read More

Most Read Posts on Validea’s Guru Investor

Below are links to our most popular posts for this week on Validea’s Guru Investor blog. [1] Why Artificial Intelligence Won’t Fundamentally Change Investing [2] Become an Equity Compounder à la Buffett [3] Annie Duke on Investing, Gambling and Decision-Making [4] Morningstar: Can Active Stock Funds Insulate Investors from Market Downturns? ——- Photo: Copyright: arcady31 / 123RF Stock Photo  

Research Affiliates on the Dangers of Using Past Returns to Predict the Future

In the first of an eight-part series, Research Affiliates addresses market returns and the dangers financial planners face with respect to setting expectations for clients. Specifically, the article highlights the following key points: Using historical returns to forecast the future is one of the most common shortcuts in financial planning” although, the article points out, the topic hasn’t received the same attention as fees, the need for rebalancing, performance chasing, or diversification. The article addresses… Read More

Morningstar: Can Active Stock Funds Insulate Investors from Market Downturns?

A recent Morningstar article outlines the firm’s performance analysis of active U.S. equity funds in both “down” and “up” markets over the twenty years ending January 2018 to determine whether they can help insulate investors from market downturns. The study found that “nearly 60% of unique active U.S. stock funds beat their indexes during the late- January/early-February correction:” Morningstar also found that those funds able to beat their benchmarks in down periods did so by… Read More

Morningstar Incorporates Artificial Intelligence into New Ratings

Earlier this month, Morningstar introduced new quantitative ratings that will cover more than 10,000 funds and ETFs. The system will use both machine learning and artificial intelligence to “learn from the rating produced by Morningstar’s analysts.” This according to an article in InvestmentNews. “Essentially,” the article reports, “the program will adjust its ratings to learn from mistakes—and incorporate improvements—made by its human counterparts.” The development stems in part from the increased workload experienced by the… Read More

Study Shows CEOs Cut Investment Right Before Equity Vests

A recent article in the Harvard Business Review addresses the question of whether today’s businesses suffer from “short-termism”—more specifically, if CEOs are cutting investment to pump up their company’s short-term stock price and then cash out their shares. While it may be easy to establish a correlation, the author–London Business School finance professor Alex Edmans–argues that it’s more difficult to establish causation. He participated in a study to determine whether short-termism does in fact exist… Read More

Harvard Lost Billion Dollar Bet on Tomatoes and Sugar

A recent Bloomberg article offers an overview of the performance of Harvard University’s endowment fund, highlighting the failed efforts by the school’s highly paid money managers to “manage risks other schools avoided.” The article reports that Jane Mendillo, who headed the endowment six years ago, led Harvard at that time into one of its “most daring foreign adventures” by investing at least $150 million in agricultural development in the impoverished northeastern region of Brazil—specifically, in… Read More

Annie Duke on Investing, Gambling and Decision-Making

In a recent podcast interview with Bloomberg, legendary poker player Annie Duke—who retired from poker in 2012—explains how “getting used to dealing with noisy data” can serve you well in decision-making, including those involving investments. In the interview, Duke shares insights outlined in her new book, Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts. Duke studied cognitive science and was pursuing a doctorate degree before becoming a professional poker player… Read More

Cliff Asness Hedges Regarding Hedge Funds

In a recent Bloomberg article, AQR’s Cliff Asness argues that the opinion pendulum on hedge funds has swung too far, that “all you read about today is that hedge funds are a failure and investors are fleeing.” This overreaction, he explains, comes in part from; (1) a failure to understand how to measure hedge-fund returns, and the fact that (2) the last few years have been a “mild disappointment and they have given critics enough… Read More