Home ownership is often called both the American Dream and the biggest investment of your life. It’s debatable whether a house is truly an investment or not, especially when we’re talking about your primary residence. Whether it’s an investment or not, house prices do change over time and the equity you build can be impacted…

One of the reasons it’s so difficult to outperform the market is because so many individual stocks themselves underperform the market. It’s not a symmetrical distribution where half the stocks outperform and half underperform. A few years ago Michael Cembalest at JP Morgan performed an extensive study on the Russell 3000 Index, which is a good…

The Credit Suisse 2019 Global Investments Returns Yearbook is a treasure trove of long-term financial market return data. This table on the (very) long-term real returns for stocks and bonds tells a good story: It shows how being an equity owner typically works out better than being a lender over the long-term. It shows financial assets can…

The 35 year period from 1930 to 1964 produced a total return of 2234% or 9.4% on an annual basis for the S&P 500 index. The 35 year period from 1965 to 1999 produced a total return of 5947% or 12.4% on an annual basis for the S&P 500 index. The 19 year period from…

Ed Thorp is arguably the best investor who never gets mentioned on the lists of history’s best investors. The investment strategies he developed at Princeton Newport are widely copied today but were new and innovative at the time. A researcher at his firm stumbled across the idea for statistical arbitrage in 1979, a strategy employed by…

Earlier this week, Morgan Stanley equity chief Mike Wilson told CNBC an earnings recession has arrived and the market is not ready for it: “We are increasingly convinced that consensus earnings expectations for 2019 have further to fall and that the optimistic uptick currently baked into fourth-quarter 2019 estimates is unlikely,” Wilson wrote Monday. “A modest…

Last week I wrote about how diversification is (almost) undefeated by showing how your chances of seeing a positive return in both stocks and a simple 60/40 stock/bond portfolio have gone up historically as you extend your time horizon: Because this was a US-centric portfolio, the obvious follow-up question (which many of my astute readers asked)…

A reader asks: Can this chart be updated easily? Also, are the stats similar for a 60/40 portfolio as they are for just the stock market? This scatterplot would also be cool to see redone with a balanced portfolio. The chart in question here is one I’ve used on a number of occasions, which shows the…

It’s become an annual tradition on this blog to update asset class returns on an asset allocation quilt I created for a few reasons: (a) Asset allocation is typically the most important aspect of portfolio management so understanding how the various asset classes performed is instructive when trying to understand your results. (b) This is a…