Factor Returns and Trading Costs

A recent article in Advisor Perspectives by BAM Alliance’s Larry Swedroe offers a list of criteria investors should consider when choosing a factor-based strategy. According to the article, “The factor must show evidence of being a unique/independent source of risk that has generated a premium that is:” Persistent across time and economic regimes; Pervasive across geographic areas, sectors and asset classes; Robust in that it holds across various metrics; Investable in that it works not… Read More

Swedroe Reviews New Book on Behavioral Investing

In a recent article for Institutional Investor, BAM Alliance Director of Research Larry Swedroe included Daniel Crosby’s new book The Behavioral Investor as one of his favorites on the study of behaviorial finance and how human nature “leads to investment errors, including the mispricing of assets.” “Crosby begins with a look at the sociological difficulties surrounding investment decision-making,” Swedroe explains, adding, “He then examines how the brain and body are poorly matched to the task… Read More

Valuation Metrics and Spreads Can Inform Future Returns

Research has found that valuation metrics and spreads can provide useful information with regard to future returns, according to an article in ETF.com by BAM Alliance research director Larry Swedroe. Metrics such as earnings yield or CAPE, the article says, “have information in terms of future returns—the higher the earnings yield, the higher the expected return; and the larger the spread in valuations between growth and value stocks, the larger the future value premium is… Read More

Swedroe: Global Diversification is Key

In an article for ETF.com, BAM Alliance director of research Larry Swedroe points out that, despite the attractive valuations and growth outlooks for emerging market stocks, most U.S. investors dramatically underweight this asset class in their portfolios. According to Swedroe, the underweighting is primarily the result of two mistakes by investors: Country bias: Swedroe writes, “investors tend to believe that not only is their home country a safer place to invest, but it will produce… Read More

Swedroe: Investing Offers No Safety Flags

In an article for ETF.com, BAM Alliance director of research Larry Swedroe argues that there are no assurances as to when it’s safe to invest in the stock market. “For many investors today,” he writes, “the market looks too dangerous. So, they don’t want to buy, or they decide to sell.” The problem with that approach, he describes (using the metaphor of a life guard flag at the beach) is that “there is never a… Read More

Swedroe Offers Perspective to Panicky Investors

In an article for last month’s ETF.com, BAM Alliance director of research Larry Swedroe offered some insight on how to weather potential market volatility using a balanced view of the current environment. “While the economic expansion is now 10 years old, expansions don’t die of old age,” writes Swedroe. “They die either because geopolitical risks show up or because the Fed tightens monetary policy, driving real rates to high levels to fight inflation.” Swedroe argues… Read More

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 Wealthmanagement.com 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 ETF.com, 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