Trying to Put the Struggles of Value Investing in Context

By Jack Forehand, CFA (@practicalquant) — Value stocks have struggled for a long time now. Although the degree of underperformance can vary significantly based on the metric you use and the universe you apply it to, there is no question that the past decade has been a bad one for value investing. And the past five years have been even worse. I have always been a big believer in value, but it is only natural… Read More

Five More Questions: Factor Investing with Jim O’Shaughnessy

By Jack Forehand, CFA (@practicalquant) This is Part II of my interview with Jim O’Shaughnessy. If you missed Part I, you can find it here. In part II, we talk about trend following, the future for simple value investing, and we take in in depth look at some of the arguments others have made in favor of the death of value investing. Just a note before we begin. This interview was transcribed from a phone… Read More

When the Best Investors Disagree

By Jack Forehand (@practicalquant) — Within the past year, I have been fortunate to interview some of the smartest minds that I know in investing for our Five Questions series. I was able to talk to Alpha Architect founder Wes Gray about quantitative value investing. I talked Daniel Crosby about behavior in investing. I spoke to Ben Hunt about how things have changed in the market and why we may not be able to rely… Read More

Five Questions: Factor Investing with Jim O’Shaughnessy

By Jack Forehand (@practicalquant) Factor investing has grown dramatically in recent years. But it is far from new. As those of us who invest using factors seek to learn more about them and the best way to utilize them in our portfolios, there is no better place to turn than those who have been there since the beginning. For this week’s interview, I have the privilege of talking to Jim O’Shaughnessy. Jim was a factor… Read More

Five Questions: The Importance of Narratives with Ben Hunt

By Jack Forehand (@practicalquant) One of the most important things any investor can do is to challenge their own beliefs. Confirmation bias leads all of us to seek out opinions that agree with us and then use them to confirm what we already think to be true.  That can be very dangerous, though, because you can end up missing obvious truths that are right in front of your eyes. Those who read my articles will… Read More

The Mechanics of Value Investing

By Jack Forehand (@practicalquant) — We all have a tendency to want to put investing strategies into groups. That can sometimes be misleading, though. There are more investment products than I can count that use the word value in their name. But beneath the surface, many of those products couldn’t be any more different. Those differences can lead to substantially different outcomes in both the long- and short-term, so it is very important to understand… Read More

Five Questions: An Academic Look at Factors with Lu Zhang

By Jack Forehand (@practicalquant) — One of the major challenges that the finance community has faced over the years is how to explain what drives stock returns over time. If the market is efficient, then the only way to generate excess returns is to take more risk. But risk only makes sense to take if you get compensated for it. Determining which risks receive that compensation has been the subject of significant research in the… Read More

Five Questions: A Wealth Manager’s View of Factors with Michael Batnick

By Jack Forehand (@practicalquant) — Factor Investing poses some interesting challenges for wealth managers. On one hand, the evidence is very strong that investing using factors produces superior to returns to market cap weighted indexes over the long-term. On the other, factor strategies introduce another set of behavioral problems for clients because the extended periods of underperformance that are common in factor investing can lead to bad decision making and underperformance relative to index funds… Read More

Five Questions: An Inside Look at ETFs with Chris Hempstead

By Jack Forehand (@practicalquant) — ETFs are both the present and the future of asset management. The combination of lower fees relative to mutual funds, tax efficiency, transparency, and intraday liquidity that they offer has led to rapid growth in the space. Although ETF assets still pale in comparison to mutual funds, it is hard to argue that they aren’t on their way to surpassing fund assets in the future. Despite the popularity of ETFs,… Read More

How ETFs Work – And Why All Investors are the Beneficiaries

By Jack Forehand (@practicalquant) — Wall Street has a reputation for enhancing itself at the expense of the individual investor. And that reputation is well deserved. It has been very common throughout history for firms on Wall Street to develop products whose primary goal is to make money rather than adding value for the investors who purchase them. So if you are looking for someone to defend the practices of Wall Street, I am not… Read More