In early March, we sent out an email announcing our plans to migrate our technology to cloud-based software, which will positively change the way that we deliver our services. The time has come, and we will be rolling out these exciting changes over the next few months. With these advances in our technology, we will be able to offer our […]
Year: 2015
Weather vs. Climate
Notice how TV news bulletins put finance next to the weather report? In each, talking heads point at charts and intone about intraday events that are quickly forgotten. Meanwhile, the long-term wealth building story gets overlooked. Many investors feel that they are not properly informed about the financial world unless they have checked daily, or even hourly, on how the […]
Familiarity Bias: Don’t “Invest In What You Know”
Every investor is familiar with the phrase, “invest in what you know.” Taking this advice leads to an undiversified portfolio with higher risks and lower returns. This psychological tendency is called familiarity bias, which must be avoided in order to become a diversified investor. I’ve noticed that many people have a significant portion of their retirement savings devoted to their […]
MasterChef of Investing
In the popular TV program MasterChef, contestants face a series of cooking challenges. From low quality ingredients to inadequate preparation and poor implementation, so many things can, and do, go wrong. It is a bit like investing. In the world of investment, there customarily are two broad approaches. The first is a traditionally active one: Managers attempt to find mispriced securities […]
Discipline: Your Secret Weapon
Working with markets, understanding risk and return, diversifying and portfolio structure—we’ve heard the lessons of sound investing over and over. But so often the most important factor between success and failure is ourselves. The recent rocky period in financial markets has brought to the surface some familiar emotions for many, including a strong urge to try to time the market. […]
The Media: Friend or Foe?
The media can be a major detriment to your investment success. Every day investors are inundated with all the latest news from fast talking commentators like Jim Cramer and major financial magazines such as Fortune and BusinessWeek. Unfortunately, listening to what these sources have to say and adopting their recommendations could have a damaging effect to your long term wealth. Only […]
2014: Patience Pays Off
Forecasters often cite a figure of 8% to 10% as a likely outcome for stock market performance in the year ahead, and 2014 was no exception. As sensible as this may sound, it is worth pointing out that over the past 89 years, the S&P 500 Index and its predecessors have never delivered a total return between 8% and 10% […]
Hindsight Bias: Don’t Look Back
How often do you look back at something and believe that you could have predicted it, or that the event seemed so obvious only after it has actually happened? If you fall into this line of thinking, you may display what is known in psychology as hindsight bias, a potential decision making killer. Perhaps the most common occurrences of hindsight […]
The Case for Owning International Stocks in 2015
I’ve had a few questions from my clients about why we own international stocks when they are underperforming U.S. stocks. For those clients who started in 2008 or later, you probably do not remember the time when international stock returns were much higher than U.S. stock returns. I have included a chart from our January 2008 quarterly letter that shows how different international returns were […]
Client Letter – Q4 2014
During the past year, the best performing asset classes were REITs (real estate) and U.S. large stocks. International stocks were all down between -1% and -7%. The following chart shows the 1-year, 5-year, and 10-year performance of many DFA funds (representing different asset classes) compared to the S&P 500 Index: Market Returns for the period ending December 31, 2014 DFA Fund […]
