First of all let me say this — no one knows what’s going to happen based on last night’s election outcome. The people who have been wrong about this outcome for so long will be the same ones who will tell you exactly how it will play out from here. They will be wrong again….

One of the hardest parts about investing is that prudent advice doesn’t always work. Risk management doesn’t always add value. Legitimate strategies can go long stretches where they don’t work very well. Diversification means you’ll always hate something in your portfolio. Junk stocks can outperform high quality companies depending on the starting prices and valuations….

“High prices attract buyers, low prices attract sellers.” There are generally two reasons for a given investment strategy to “work” over time: You earn a premium by accepting more risk. You take advantage of the behavior of other market participants. If I put my rational, textbook theory cap on, number one should make sense. But there’s…

If I had to pick just one behavioral bias to help understand why people make the decisions that they do it would be loss aversion. Daniel Kahneman’s research discovered that people regret losses around twice as much as gains make them feel good. Some people will look at these types of biases and conclude that…

“There’s one good financial idea every decade or so, and 5 to 10 marketing ideas a week.” – Eugene Fama The Vanguard Total World Stock Market Index Fund holds a little over 7,600 securities. The Vanguard Total U.S. Bond Market Index Fund and Total International Bond Market Index Fund collectively hold over 12,400 securities. As…

A few weeks ago I talked with Robin Powell about our upcoming Evidence-Based Investing Conference and a host of other topics. He asked me what my motives are for writing this blog. I don’t usually put much thought into this but here’s my answer: I was never much of a writer before starting my site, but…

I caught Vanguard’s John Bogle on a recent Bloomberg interview discussing his simple formula for estimating future stock market returns: I have a reasonable expectations kind of formula that I’ve been using for 25 years and it’s worked the whole 25 years almost perfectly. There’s some decades where it doesn’t work as well as it…

There is a new Robert Cialdini book out this week — Pre-Suasion: A Revolutionary Way to Influence and Persuade. I have it on my Kindle but have just started reading it. I’m sure I’ll have more to say when I finish it in the coming weeks. The reason I’m so excited about this new effort…

Long Term Capital Management is a perfect example of how hubris can derail even the most brilliant of investors. The hedge fund was filled with PhDs and Nobel Laureates, but was highly leveraged while relying far too heavily on quantitative risk models that didn’t factor in the potential for unexpected events to occur. When Russia defaulted on…

The markets have a way of making investors fearful whether stocks are up (they can’t rise any further can they?) or down (surely the worst is yet to come, right?). It’s always something which is what makes the markets equal parts fascinating and gut-wrenching. There was a great post at The Monevator this week where the pseudonymous…