The midpoint of the year is approaching, and the market is on track for its second year in a row of above-average returns. This has many investors asking about rebalancing. Below are some commonly asked questions on this topic. What is rebalancing? Suppose that to balance risk and return in your [...]
The Virtue of a (Financial) Barbell
In 1987, Nassim Nicholas Taleb was a trader on Wall Street. But unlike most of his peers, Taleb wasn’t pinning his hopes on a market rally. Instead, he had positioned himself to benefit from a market meltdown. On October 19 of that year, just such an event occurred. For no apparent reason—in the [...]
What the Data Says
In the investment world, there’s no shortage of data. But how useful is it? To help get to an answer, let’s consider these four questions: When the economy is strong, is that good for stocks? The simple answer is yes. According to textbook finance, the value of any company should represent the [...]
Solving an Investment Conundrum
Among the more notable studies published in recent years was a paper by Hendrik Bessembinder titled “Do Stocks Outperform Treasury Bills?” His key finding: Between 1926 and 2016, just 4% of all stocks accounted for all of the net gains in the U.S. market. The other 96%, as a group, delivered returns [...]
Responding to Market Reversals
“It's tough to make predictions, especially about the future.” That’s one of the more amusing quotes attributed to Yogi Berra, but there’s also a lot of truth to it. When it comes to financial markets, the track record of those making forecasts is not good. That’s why a rational approach to decision [...]
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