Investments

Despite impressive evidence that most short-term movements in the markets are random, professional and amateur investors alike continue to throw hundreds of billions of dollars at strategies designed to beat the market. The common perception is that certain securities are “mispriced”—that is, investors have bid them too high or too low based on their inherent value.The human mind has evolved […]

It’s a simple fact: investors abhor losses. They engage in all sorts of strategies and practices in order to avoid or minimize losses. At the same time, investors are often excitable and greedy. When a segment of the investment market goes through a prolonged upswing, they throw money at it as they chase recent returns. Many academic studies, as well […]

Happy New Year!  The year 2006 was a great one for equity investors around the world as stock prices rose in 46 of the 50 countries whose equity market returns are reported by MSCI. Among these, only Israel,Jordan,Thailand, and Turkey saw their local stock market indexes slump for the year. The 2006 return for US stocks was 15.32% according to […]

The beginning of  a new year is a good time to take stock and to review basic investment principles. Anyone investing in the stock and bond markets could do no better than to review the timeless and valuable lessons taught by legendary investor Benjamin Graham. Known as the father of securities analysis and as Warren Buffett’s stock market tutor, Graham, […]

With all the sizzle and excitement in the stock market, bonds don’t always get the respect they deserve from individual investors. After all, how can you get excited over returns of 5% or 6% in bonds when you can have profitable periods of 25%-plus in stocks? It’s easy: when stocks hit their inevitable down periods, bonds can prop up a […]

When Michael Steinhardt tells you not to invest in hedge funds, you had better take notice. Steinhardt left the hedge fund business in 1995 after running one of the most successful funds ever. He wrote a recent guest editorial in The New York Times excoriating the industry’s marketing and warning most investors to avoid such funds. “As recent history shows, the outsized […]

Mutual fund investors can improve their returns by focusing on the costs of running individual funds, says former Vanguard Investments Chairman John C. Bogle. “Costs clearly differentiate the superior performers from the inferior performers,” he writes. Bogle showed that costs matter in his newest book, “The Battle for the Soul of Capitalism” (Yale University Press, 2006). He did a study […]

There are three truisms that keep finding new confirmation and that investors should ignore at their own risk: Buy and hold the market, don’t try to beat it. Index fund investors will beat most other investors. Stodgy value stocks usually beat sexy growth stocks. Two new real-world studies covering the U.S.market since 1957 dramatically illustrate these points. In one, the […]

Inflation is one of the hardest concepts for an investor to internalize. We tend to think naturally in nominal prices—that is, the price on the sales sticker—rather than the inflation adjusted price. For instance, which “feels” like the cheaper one-pound loaf of white bread—the one that cost 51 cents in October 1980, or the one that cost $1.04 in October […]