Five Questions: Private Equity in Public Markets with Brian Chingono

By Jack Forehand (@practicalquant) —   There are many misconceptions about private equity investing. Many investors view it as a domain where the rich and institutions earn outsized returns that are not available to the average person. It is viewed as an exclusive club with huge benefits that only the elite can be part of. But at its core, private equity is just investing in companies much like public investing is. It is a bet on the… Read More

The Case Against Value Stocks

By Jack Forehand (@practicalquant) —   Confirmation bias is one of the biggest problems in investing. We all have a set of core beliefs, and we tend to surround ourselves with people who also believe them and focus on information that validates them. For me, one of those things is that value stocks will beat the market over time. There is no shortage of data to support value. The academic research shows that is has worked historically.… Read More

Some Thoughts on Multi-Factor Investing

By Jack Forehand (@practicalquant) —  Last week, I interviewed Liqian Ren of WisdomTree for our Five Questions series about multi-factor investing. The topics we covered were fairly complex so I wanted to take a step back and discuss some of the concepts in more detail. The basic theory of multi-factor investing is pretty simple. It has been widely proven that factors like value and momentum can outperform the market over long periods of time. But no reward… Read More

Five Questions: Multi-Factor Investing with Liqian Ren

By Jack Forehand (@practicalquant) —   Factor Investing has proven itself over long periods of time. But there is a price that has to be paid for its outperformance. The individual factors such as value, momentum and quality all can have extended periods where they underperform the market. One way to smooth out the returns from the individual factors is to use them together in a multi-factor portfolio. When constructed properly, multi-factor portfolios can produce comparable returns… Read More

Factor Timing: Sin Less Than a Little

By Jack Forehand (@practicalquant) —   There is perhaps no issue that is the subject of more debate in the factor investing community than factor timing. We are all trained to buy low and sell high, and it is tempting to conclude that we can do the same thing with factors. For example, if value stocks have struggled for a long period of time and they are cheap relative to their history, it makes intuitive sense to… Read More

Five Questions: Behavior in Investing with Dr. Daniel Crosby

By Jack Forehand (@practicalquant) —   There is probably nothing that hurts our investment returns more than our behavior.  We spend a lot of time debating things like whether we should invest in active or passive funds or whether value or momentum is a better investing factor, but in doing that we often lose sight of the thing that studies have shown detracts from our returns more than all of that. The way we are wired as… Read More

The Benefits of Base Rates

By Jack Forehand (@practicalquant) —   Wall Street prediction season is upon us. It is the time of year when all the major investment banks and market pundits will issue their 2019 market outlooks. They will tell you what they think will happen in the next year and will even by nice enough to give you exact price targets they think the S&P 500 will reach by year end. Unfortunately for all of us, those predictions won’t… Read More

When Hypothetical Becomes Real

By Jack Forehand (@practicalquant) —   The day you begin to follow a new investment strategy is typically a day of optimism. You have done your research, you have looked at the historical results, you believe in the investment process, and you expect to see similar returns in the future to what the strategy has done in the past. You have even potentially looked at the ups and downs of the strategy and are prepared for the… Read More

When Your Experience Fails You

By Jack Forehand (@practicalquant) —   Because it’s easier, we’re inclined to use our recent experience as the baseline for what will happen in the future. In many situations, this bias works just fine, but when it comes to investing and money it can cause problems. -Carl Richards The next market crash must be coming. We are already in our second correction of the year and having lived through the past two bear markets, it seems obvious 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