Forecasting is a Folly

The tendency at this time of year for those in the financial industry to make predictions about what’s to come is characterized by Bloomberg columnist Barry Ritholtz as a “prelude to looking foolish.” “Over the past years,” writes Ritholtz, “it has been my distinct privilege (and, truth be told, pleasure) to point out how silly this process is,” adding that some of the financial industry’s bigger firms and notable economists are jumping on the bandwagon. Referencing… Read More

Ritholtz on Why We’re Bad at Forecasting

Forecasts are unproductive, writes Barry Ritholtz in a recent Bloomberg article, and we should not make investment decisions based on them. Ritholtz offers a list of reminders for readers of “what we know about forecasts and predictions, and why they are so rarely right.” Here are some highlights: We’re generally bad at it. “Examples are everywhere,” Ritholtz argues, citing how data provides clear evidence to support our failings at economic forecasts, expectations of future technologies,… Read More

Ritholtz on the Question of When to Sell Stocks

The decision of when to sell a stock, according to Bloomberg columnist Barry Ritholtz, is “perhaps the most overlooked and underappreciated problem in finance.” Ritholtz provides a list of questions for an investor to ponder when attempting to make what can be a difficult and complex decision. These include: What is the basis for the selling? In most cases, Ritholtz argues, clients cite news headlines or emotional reasons behind their desire to sell. “Experience teaches… Read More

Ritholtz on Bulls and Bears

To determine whether you harbor a bullish or bearish viewpoint, writes Bloomberg columnist Barry Ritholtz, requires that you consider the causes of the current stock market rally. Ritholtz, a self-proclaimed bull, offers a list of drivers in what he sees as the order of significance. Here are some highlights: Global economic expansion: “Monetary policy,” writes Ritholtz, “is being normalized; growth, employment and wages are mostly solid.” Earnings: Ritholtz points out that earnings are the underlying… Read More

Ritholtz & Kaissar on Passive Versus Active Management

 In a recent online debate concerning active vs. passive investing, Bloomberg columnist Nir Kaissar and Ritholtz Wealth Management’s Barry Ritholtz offered a range of arguments and insights. Here are some highlights: Cost and performance: While Ritholtz believes investors should allocate a “big chunk” of their portfolios to index investing because of lower costs and better performance, Kaissar argues that active (primarily for those focusing on value, quality and momentum) isn’t necessarily more expensive than passive.… Read More

Ritholtz on the Challenges of Active Investing

In a Bloomberg article from earlier this month, columnist Barry Ritholtz outlines some of the benefits and challenges inherent in active investing. He cites the following “desirable goals” and some corresponding impediments to those goals: Alpha: outperformance versus a benchmark. “Of all the reasons to be an active investor,” writes Ritholtz, “alpha may be the most difficult to achieve.” He underscores the significant hurdle that both fund managers and individual investors face when attempting to… Read More

Barry Ritholtz: Market Performance Isn’t Due to President

In a recent Bloomberg article, the co-founder and chief investment officer of Ritholtz Wealth Management debunks the notion that the stock market’s record performance is tied to hopes around the president’s policy agenda. Ritholtz argues, “First, there is the tendency of the markets to ignore the dysfunction in Washington—as they have for most of the past decade. If the markets are really rallying on expectations of good things from the government, then the inability to… Read More

Finding Your Edge a Key to Investing Success

By John P. Reese The mathematician Ed Thorp figured out how to beat Las Vegas casinos at blackjack and baccarat and they didn’t like it. But the MIT and University of California Irvine professor didn’t get discouraged. He applied those same mathematical principles to the markets, and also won. Mr. Thorp knows that good ideas have limited runs. As more investors pile into a winning trade, the returns start to diminish and the idea can… Read More

Ritholtz Says Stock-Picking is Still Alive if Not Kicking

Active fund management has been losing followers but isn’t going away entirely, writes Barry Ritholtz in a recent Bloomberg article. While stock-picking has seen a host of changes, he offers several insights as to “how we got here” including the following: Beating the market is tougher than most people thought, a notion that Ritholtz says has become “widely accepted among both professional investors and individuals.” We have a much greater understanding of investor psychology, and… Read More

Barry Ritholtz on Bulls and Bears

Understanding how old a bull market is may very likely affect your expectations of future returns as well as your investment allocations and risk appetite, writes Bloomberg columnist Barry Ritholtz. With regard to what many are calling an eight-year-old bull market, Ritholtz argues, “Rather than saying that the bull market is celebrating its eighth birthday, what we really are observing is the eighth anniversary of bear-market lows.” The difference is in the details, says the… Read More