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.

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.

Are You a Performance Taker or Seeker?

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.

Confessions of an Index Investor

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.

To Tilt or Not to Tilt

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 [...]