"Money is like soap, the more you handle it, the less you will have." – Gene Fama The typical owner of an individual bond couldn’t care less about the current price of that bond. When asked “why not?” they’ll say it’s because they plan on holding it to maturity. This is a technically wrong but a behaviorally useful way of... Read More
Three Tips for Evidence-Based Retirement Plans
*A version of this article originally appeared on the CFA Institute's Enterprising Investor blog. I recently participated in a fun exercise. My friend Phil Huber, CFA, asked a group of us to define Evidence Based Investing in 10 Words or Less My favorite definition came from Bob Seawright, who said, “A relentless focus on what works, what doesn’t, and why.” On... Read More
Best practices in investing
If you need to cross a river, it's unlikely the bridge below you will collapse. That's because the engineer has been trained in hundreds of years of best practices. From tension and compression to the latest on when and where to use a beam, arch, truss or suspension for support, she knows what's come before. Not only that, but the... Read More
Because I said so investing…
‘Because I said so‘ is the easy answer as a parent but rarely the best response. It's one I swore as a kid I'd never use when I grew up, but I do. The investing version of this time-saving shortcut, “Because I said so investing,” is allocating based on headlines—something we all know we shouldn’t do, but that proves tempting... Read More
Margin Debt Hits All-Time High, or Does It?
If it bleeds, it leads. ~Joe Loder in Nightcrawler Margin debt recently hit an all-time high—$528 billion as of February month end. But, by another measure, margin debt divided by underlying assets, it’s actually at a lower level than it was in February 2009—the start of the market recovery from the global financial crises. So, how concerned should you be... Read More
How Do You Know If Your Investment Strategy Has Stopped Working?
Over the last three calendar years, Global stocks (MSCI All Country World Index - ACWI) have returned a meager 3.7% annualized leading some to question their investment approach. Large market moves up are obviously fun, and even big moves down are often easier to ride out (at least you can see something happening) than a sideways markets. It’s extended periods of... Read More
Contradicting Warren Buffett: When Volatility is Risk
Last week I enjoyed dinner with a group of people, one of which happened to be a hedge fund manager and fellow CFA charterholder. As us finance-types are wont to do, we quickly made our way to a discussion of every investment nerd’s favorite question: what is risk? Warren Buffett, in his 2014 Berkshire Hathaway annual letter (page 18), shared... Read More
[W]indexing: When Average Isn’t Average
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident. –Arthur Schopenhauer 19th-century German philosopher, Arthur Schopenhauer thought truth (and in this case, we'll extrapolate to include “new ideas”) passed through three stages: ridicule, opposition, then acceptance. While the index fund, which turned 40 last year, is a... Read More
The Biggest Mistake Older Investors are Making Right Now
Next month, Cordant is releasing a short eBook titled “Three Mistakes Intel Employees Make as They Approach Retirement.” One of the mistakes we identify in the eBook is a willingness for late-career employees to take on too much risk with their investments as they approach retirement. It's a mistake we frequently see among Intel employees, many of which are striving... Read More
What If….
What if you had the choice between two investments: both earning $100 per year, but one taxed at 30%, and the other at 20%? For which would you be willing to pay more? What if investment A was otherwise identical to investment B, but had an upfront fee and significantly higher transaction costs than option B: Which would you rather... Read More