Finding the Limitations in Your Investment Process

I attended a conference recently where one of the speakers was the head portfolio manager of legendary investor George Soros’s family office. This guy was good. He touched on nearly every hot button issue in the markets and the the economy.

How Often Are Markets “Normal?”

Stock market prices are artificially high. Bond market yields are artificially low. Valuations are at unsustainable levels. It’s all paper gains that will be erased eventually. We need a more normalized environment. Investors and pundits have been hammering these points home for some time now. And there is some legitimacy to the idea that interest…

Liquidity Risk: Same as It Ever Was

For the past two to three years now I’ve read article after article about the potential for market dislocations during the next downturn because of liquidity issues in certain areas of the market. It’s now easier than ever to invest in almost any type of security or market you can think of through ETFs or…

The Shrinkage Effect in the Stock Market

There are a number of reasons cited for the fact that active fund managers have had a difficult time beating the markets over the years — higher costs, more trading activity, closet indexing, mis-timing the market, a shift to index funds and more highly-skilled investors, to name a few. Here’s another theory to add to…

How to Overcome Your Fear of Public Speaking

If you were to ask people what biggest fear is the list would usually include things like flying, spiders, heights, being confined in tight spaces and even clowns. Yet one fear affects a majority of people more than anything else — public speaking. This is according to a number of different surveys that ask people what…

Experience or Expertise?

In the first episode of his new podcast, The Knowledge Project, Farnam Street’s Shane Parrish interviews Michael Mauboussin about a wide range of topics centered around the decision-making process. Mauboussin had some interesting things to say about the difference between experience and expertise: There is a great quote from Greg Northcraft, which I love, when…

A History of Bond Market Corrections

It’s been almost four years since the S&P 500 has had a 10% correction. That makes it the second longest such streak since World War II, trailing only the period from 1990 to 1997 that went longer without experiencing a double digit loss. Bonds, however, the investor’s go-to asset class for safety, have experienced two…

How Much International Diversification is Necessary?

A reader asks: Does it make sense to equal weight the Europe and Pacific ETFs as opposed to just buying the entire EAFE index fund? How has this strategy done historically? This is a great question because so many U.S. investors have a home bias within their portfolio and probably don’t spend enough time thinking…

Conflicting Finance Narratives

Learning about investing from some of the all-time great investors can be both enlightening and confusing all at the same time. Enlightening because it always pays to stand on the shoulders of giants, but confusing because even the greatest investors disagree on the best ways to be successful in the markets. An example from two…