Each year, Portfolio Solutions, LLC puts forth a 30-year forecast for stock and bond market returns. This forecast is intended for making long-term asset allocation decisions as opposed to short-term tactical decision. We know it’s not possible to predict short-term asset class returns and do not try. However, it is possible and important to estimate long-term expected returns in portfolio construction.
Mutual funds are sold to the public like lottery tickets. They’re promoted with fanfare and colorful marketing campaigns that emphasize the possibility of earning a high return. What people don’t see is the high probability of losing out because the performance of most mutual funds is below the market. Possible and probable mean separate things. Understanding the probability for success and knowing what a fair payout is are critical when playing the lottery or selecting mutual funds.
I am a huge fan of low-cost index funds. They provide investors with their fair share of market return in each investment category without paying high fees or dealing with the frustration of trying to guess which active manager will get lucky. That being said, there’s always a category or two each year where the [...]
Give a monkey enough darts and they’ll beat the market. So says a draft article by Research Affiliates highlighting the simulated results of 100 monkeys throwing darts at the stock pages in a newspaper. The average monkey outperformed the index by an average of 1.7 percent per year since 1964. That’s a lot of bananas! [...]
Capital gains and dividend taxes are likely going up considerably in 2013 for people who have higher incomes. Many people believe this will depress stock prices. I don’t see that happening. In fact, prices may go higher if there are offsetting corporate tax cuts.