I Think, I Know, I Have No Idea

By Jack Forehand (@practicalquant) —   There are some areas of life where you can never have all the answers – no matter how much you know, how smart you are, or how good the school was you got from your degree from. Investing is one of those areas. As humans, we want to believe we can know everything. We want to believe if we work harder or read more, we can finally get to a place… Read More

The Losing Battle to Consistently Beat the Market

By Jack Forehand (@practicalquant) —   It is commonly accepted the beating the stock market over the long-term is really difficult. Over the past 15 years, about 70% of large-cap managers have trailed the S&P 500 and about 80% of small-cap managers have trailed the Russell 2000. Investors in these funds have done significantly worse than that. The so-called behavior gap, which measures the difference between a fund’s performance and the performance of investors within the fund,… Read More

Slower Earnings Growth Will Test Bull Market

Many analysts say that the rapid growth in U.S. corporate earnings may have peaked in the first quarter of this year, according to a recent article in The Wall Street Journal. According to FactSet data, the article says, earnings growth is expected to reach 19% in the second quarter, 21% in the third and 17% in the fourth, with numbers in the single digits next year. But some analysts argue that the slowing might be… Read More

Ritholtz Ranks What Helps or Hurts Investment Returns

In a recent Bloomberg article, columnist Barry Ritholtz ranks those factors that he believes drive investment portfolio returns. “An unexpected challenge in performing this exercise,” writes Ritholtz, is a tendency for some elements to offset others.” Ritholtz identifies eight “broad elements that typically determine the total return of any portfolio,” in descending order of importance (i.e. factors later in the list could potentially offset those listed earlier): Security selection: “No doubt,” writes Ritholtz, “better stock… Read More

Swedroe Talks Factors and Fixed Income

In a recent article for ETF.com, BAM Alliance director of research Larry Swedroe discusses how factor investing can apply to the bond market, even though it has been slower to gain popularity in fixed income compared to the equity market. The article cites a study by a team at AQR Capital Management that “applied the value, momentum, carry [the tendency for higher-yielding assets to outperform lower-yielding assets] and defensive style premiums to country and maturity… Read More

Morningstar: Investors are Making Better Use of Their Funds

A recent article in Morningstar  highlights the firm’s research into historical trends in fund investor returns which show, “times have been good lately, and we can see that in a look at aggregate investor-return data through the first quarter of 2018.” The study analyzed open-end mutual fund investor returns over the trailing three-, five- and 10-year periods by asset class and by Morningstar category. By asset-weighting investor returns, the study was able to highlight the… Read More

Research Affiliates Says Spread Factor Bets

At the 30th annual Morningstar Investor Conference held last month, passive strategist Adam McCullough interviewed Feifei Lee, director and global head of Research Affiliates Investment Management Group about her firm’s multifactor investment strategy. Here are some highlights: According to Lee, Research Affiliates offers investors a multifactor strategy that combines individual factor portfolios while remaining transparent with respect to which factors are under- or out-performing. The strategy employs five factors; value, momentum, low risk, quality and… Read More

El-Erian: Factors that Could Disrupt Global Growth

A recent Bloomberg article by Allianz chief economic adviser Mohamed -Erian outlines recent global developments that have “exposed cracks in a seemingly happy” market environment, including: “Brexit, tariffs, currency meltdowns in Argentina and Turkey, a China growth scare, and a financial near-explosion in Italy,” to name a few. Although El-Erian argues that the inclination may be to consider each event as unique to its country, this approach “risks overlooking that something deeper is going on… Read More

Tips for the Contrarian Investor

“Being a contrarian for the sake of being contrarian,” says a recent Morningstar article, “is as likely to lead you to investment errors as it is to get you booted off invitation lists for parties.” The article offers insights regarding how a contrarian investing strategy can work best, noting, “the key is to identify environments where market efficiency drops—that is, when investors are behaving irrationally. As valuation-driven investors, we base that identification process on fundamentals… Read More

Apple Taking a Bite out of its Own Stock with its Buyback Program

Apple has been repurchasing its own shares at what a recent Wall Street Journal article describes as a “furious clip since last year’s tax-overhaul package freed up more than $250 billion” in the company’s offshore bank accounts—and in a recent earnings call Apple said it intended to buy back another $10 billion by the end of June. Given these efforts to “lighten its massive cash load,” the article points out, reaching a market capitalization of… 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] The Losing Battle to Consistently Beat the Market [2] Value Investors Face Existential Crisis [3] Secrets to High Returns: Has the Hunt for Factors Gone Too Far? [4] Harvard and Yale’s Investing Models Should be Available to Every Investor ——- Photo: Copyright: arcady31 / 123RF Stock Photo