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.
There are two categories of investors in this world: performance takers and performance seekers. A performance taker is satisfied with earning a fair share of the market’s return and weathering the risk that comes with it. A performance seeker wants more return and less risk, and pays for it in more than one way.
I’m a diehard index fund fan. I’ve written books on index funds, lectured on index funds, co-authored an award-winning paper on portfolios of index funds, and Forbes even named me “The Indexer” when I began writing for them several years ago. The problem with being “The Indexer” is that I don’t invest in all index funds. Truth be told, my portfolio is a combination of funds that follow indexes, quantitative funds that don’t follow indexes and actively managed funds. I don’t even consider following an index as being paramount in portfolio management as long as you’re capturing the risk premiums you’re seeking in a low-cost and efficient manner.
I tilt. Do you tilt? It’s OK to tilt. Many people tilt. I’m not talking about posture or politics – I’m talking about portfolio design. A portfolio “tilt” is industry slang for an investment strategy that overweighs a particular investment style. An example would be tilting to small-cap stocks or value stocks that have historically [...]
Technical analysis reminds me of searching for gold at the end of a rainbow. Children of all ages are mesmerized by the story, yet no one to date has found a pot of gold. It’s not because gold isn’t there – it most certainly exists in the mind of every child. The problem is the rainbow; it’s circular, there is no end to it.