How to Deal with Poor Investment Performance

An article in Advisor Perspectives, BAM Alliance research director Larry Swedroe discusses how to deal with underperforming investments, offering data to support the idea that an investment strategy should be built around the notion that: (1) all risky assets have similar risk-adjusted returns; and (2) you should diversify your portfolio across as many unique sources of risk that meet the criteria you have established for investment (e.g. persistence, pervasiveness, robustness, and intuitiveness). Swedroe notes that… Read More

Quick Takes – Key Insights From Swedroe, Asness & Gray

By Jack Forehand (@practicalquant) —   Below are some of our favorite things we read or listened to this week and one important lesson we took from each of them. This Week’s Topics Why Factor Investing is So Hard Industry Concentration in Factor Investing Reframing the Pain of Underperformance as a Positive Article: What to do When an Investment Strategy Performs Poorly Lesson: Successful implementation of factor investing strategies requires sitting through extended periods of underperformance This… Read More

Comparing Strategy Performance of Bernstein, Swensen, Browne and Swedroe

An article in compares the performance of four financial gurus by outlining a simulation of their signature portfolios “using readily available index funds and grantor trusts, annually rebalanced from September 2005 through July 2018, and put them up against a classic ’60/40′ portfolio of U.S. stocks and broad market bonds”: The data shows that, over the past 13 years, the approach of David Swensen (who has been chief investment officer at Yale University since… Read More

Swedroe on Persistence in Active Investment Performance

In an article for, Bam Alliance director of research Larry Swedroe summarized the findings published in the S&P biannual Indices Versus Active (SPIVA) reports which compare the performance of active managed equity funds to their appropriate index benchmarks. “The bottom line,” Swedroe writes, is that “there is no evidence of persistence in performance greater than randomly expected among active equity managers. Making matter worse is that a stronger likelihood existed of the best-performing funds… Read More

Swedroe on Factors in Emerging Market Stocks

In a recent article for, BAM Alliance director of research Larry Swedroe outlines findings of an August 2018 study on factor-based investing titled, “The Cross-Section of Equity Returns in Emerging Markets.” Among the many findings of the study–which covers 27 emerging market countries for the period between 1988 and 2014—here are some highlights: Size, value and momentum anomalies are statistically significant using value-weighted portfolios; After controlling for company size, the book-to-market ratio and momentum… Read More

Swedroe on What Makes Factors Last

In an article on, BAM Alliance research director Larry Swedroe discussed issues related to factor investing, the potential problems with research around it, and the criteria he believes must be met to suggest that a factor will endure. According to Swedroe, a factor should first meet the following two conditions: Be a unique source of risk and return not explained by other well-documented factors already used in asset pricing models; Have delivered a premium… Read More

BAM’s Swedroe Discusses Size Effect

In an article on size effect, BAM director of research Larry Swedroe discusses the ongoing debate on the size effect—the phenomenon whereby small-cap stocks on average outperform large-cap stocks over time–which was first documented by Rolf Banz in 1981 but “basically disappeared in the United States” after Banz’s paper. Here are some highlights of the article, which cites a variety of research including papers by AQR and others: Part of the size premium may… Read More

Swedroe on Active Management in Emerging Markets

In a recent article in, BAM Alliance director of research Larry Swedroe debates claims that active management is the “winning strategy” in emerging markets. Citing SPIVA and Morningstar data as well as academic research, Swedroe makes the case that, “at least for investors who do not have access to institutional EM funds, active management is a loser’s game.” For example, writes Swedroe, SPIVA data shows that for the last 5-, 10- and 15-year periods,… Read More

Swedroe Talks Factors and Fixed Income

In a recent article for, 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

Swedroe Addresses Indexing Concerns

In a recent article for, Larry Swedroe breaks down concerns regarding passive investing, including the notion that it has “become such a force that the market’s price discovery function is no longer working properly.” Swedroe, director of research for the BAM Alliance, makes the following points: A recent Vanguard study showed that, as of October 2017, $10 trillion was invested in index funds. “While a large figure,” Swedroe writes, “it represents less than 20%… Read More