Two Index Fund Studies Remind Us of One Good Strategy

Index fund investors let the facts speak for themselves. The long-term data comparing active funds to index funds shows actively managed mutual funds underperform in all asset classes and all investment styles. There is no ambiguity in the results, and there’s nothing new to report here. The data has been saying the same thing for [...]

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The ETF Decision Is Not All or None

Shoebox design has not changed much in 50 years. Shoeboxes are still the same shape, made of the same flimsy cardboard and hold one pair of shoes. The color and lid design do vary among companies, but it’s not a big deal for shoe buyers. We’re only interested in what’s inside the box. The expansion [...]

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Asset Class and Investment Strategy

Asset classes and investment strategies are two different concepts. An asset class is a category of tangible or intangible assets whose scope may or may not be fully quantifiable. The quantifiable part is the raw material from which an investment strategy is created. US equity is an asset class that’s fairly easy to define and measure. How one invests in US equity is an investment strategy, and there are many ways.

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Fighting Through Risk Tolerance Questionnaires

What people say they believe about financial risk and the way they think they’ll act under market stress is often contradicted by their behavior. Long-term investors frequently become short-sighted at the first sign of trouble. Many times this reaction is brought on by answering an investment questionnaire under the influence of recency bias.

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Dealing with Volatility

Volatility. Investors hate it. Any downturn in stocks creates fear for even the most experienced investor. We can’t get around it. The feeling is natural. When something is cutting away at our net worth, we want to stop it. “It would be nice to have my money in cash right now,” our minds tell us, even though we know that’s not in our best long-term interest.

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