Five Questions: Tackling Some of the Toughest Questions in Investing with Michael Mauboussin

By Jack Forehand, CFA (@practicalquant) There are many skills that can benefit you as an investor. Being smart is certainly an asset, although it can also get you in trouble if you don’t know your limitations. The ability to control your emotions is also a huge plus. But I think the most important skill may be the ability to think critically. Having a process you use to view the investing world through and following that… Read More

Five Questions: Factor Timing with Nicolas Rabener

By Jack Forehand, CFA (@practicalquant) Factor timing is a pretty controversial topic in the quantitative investing world. On one hand, we are all taught that we should buy low and sell high, so it seems intuitive to add exposure to factors that are out of favor. But in reality, it isn’t that simple and factor timing is much more difficult than it would seem in theory. This issue has also divided some of the smartest… Read More

The Rising Bar for Active Management

By Jack Forehand, CFA (@PracticalQuant) Active managers as a whole have always been pretty bad at their job. Depending on what data source you use and what time frame you look at, somewhere north of 80% of active equity managers underperform their benchmarks after fees over long periods of time. When building Validea, we’ve tried to key in on those individuals and strategies that have a long term record of success, but the number of… Read More

Why Return Skewness Offers Some Hope for Value Investors

By Jack Forehand, CFA (@practicalquant) It is no secret that value investing strategies have struggled for a long time now. The extended period of underperformance has tested the patience of many value investors and has led some to abandon the approach entirely. Adding to the frustration have been the frequent calls from some well-known value investors that we are at or near the end of this period of underperformance and that value is about to… Read More

Never Say Never

By Jack Forehand, CFA (@practicalquant) Never tends to be an overused word in investing. Don’t get me wrong, I am big believer that the past is often the best guide to the future. I think base rates are the best tool we have when trying to predict what will happen going forward. But relying on the fact that something has never happened in the past to predict that it will never happen in the future… Read More

What I Do With My Personal Portfolio

By Jack Forehand, CFA (@practicalquant) Josh Brown of Ritholtz Wealth Management wrote an interesting article a month or so ago about how he invests his money and it got me thinking about how more investment bloggers should do the same thing. It is one thing to talk about the investing concepts you believe in, but the additional step of seeing how you put those concepts to work in practice can be valuable. So in that… Read More

Five Questions: Hidden Risks in Investing with Corey Hoffstein

By Jack Forehand, CFA (@practicalquant) Investing in the stock market is a risky activity. The obvious risks like losing a large portion of your portfolio during a bear market, or underperforming the market by a wide margin if you employ an active strategy can be more than many investors can handle. Given th high level of risk that is inherent in investing, it doesn’t make sense to take more risk than you have to. But… Read More

Five Questions: Lessons From Finance History with Jamie Catherwood

By Jack Forehand, CFA (@practicalquant) Recency bias can be a major issue for many investors. When we analyze the probability of any event in the market occurring, we tend to rely more on the recent past than we should. That can mean that we give too much credence to the most recent year or most recent few years. But it can even go further back than that. For example, when we think about what a… Read More

Six Common Misconceptions About Factor-Based Strategies

By Jack Forehand, CFA (@practicalquant) Factor strategies have grown exponentially in the past decade. Almost every major asset manager now offers their variation of things like value, momentum, quality, and low volatility, and each of them has their case as to why their approach is better than the others. But at their core, all these strategies rely on one basic principle – that if you invest using factors, you will earn an excess return over… Read More

Five Questions:  Questioning Conventional Wisdom With Lawrence Hamtil

By Jack Forehand, CFA (@practicalquant) Anyone who reads my articles regularly knows that I am a big user of Twitter. Some of the best investors in the world regularly post to the platform and it is hard for me to describe the amount I have learned from using it. My favorite people to follow on Twitter are those who make me think about things in different ways than I currently do. One person who certainly… Read More