Last week I referred to the stock market as a hall of mirrors. That was perhaps too kind. With its erratic and often illogical movements, the market also has elements of a pinball machine, a rollercoaster, and maybe a clown car. This has always been the case, but it feels especially true this year. [...]
Hall of mirrors
On Wednesday of this week, the Federal Reserve’s policymaking committee concluded its quarterly meeting and made two big announcements. First, the Fed is going to scale back its monthly purchases of Treasury securities. Because these multi-billion-dollar purchases have helped keep interest rates [...]
One step at a time
A few weeks back, I talked about the good-is-better-than-perfect principle. A close corollary is to approach financial decisions incrementally. What do I mean by that? An example is dollar cost averaging, whereby a sum of money is invested in regular increments rather than all at once. Does [...]
Intersections
Back in the 1950s, economists Franco Modigliani and Merton Miller developed a theory that, even today, is taught in virtually every finance class. To understand this theory, suppose you’re running a company and want to build a new factory. To raise money for this project, you generally have two [...]
The good and the perfect
Last week, The Wall Street Journal carried a seemingly innocuous article by Derek Horstmeyer, a finance professor at George Mason University. Horstmeyer described an analysis he and his team had recently conducted. The question they sought to answer: Could investors achieve better results in their [...]
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