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Insights



Timing is Everything (if It Works)

In or Out? If your asset allocation from a week ago made sense then, what has changed to make it less appropriate today? Avoiding knee-jerk reactions in these scenarios is usually the prudent course. To help quell the fears of those still tempted to temporarily take risk “off the table,” we ran a few experiments to help demonstrate why staying the course has historically been shown to be a good option. It is good to remember that for any market
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Singled Out: Historical Performance of Individual Stocks

KEY TAKEAWAYS Single stocks have a wide range of returns. Only about a fifth of stocks survive and outperform the market over 20-year periods. They delist at a high rate, even those that have been around for a long time and have outperformed the market for 20 years. The chance of any single stock outperforming the market in the future is not meaningfully different when conditioning on its past performance. Many investors end up holding large concentrated positions in single
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Surprisingly Benign: How Stocks Respond to Hikes in Fed Funds Rate

On May 4, the US Federal Reserve increased the target federal funds rate(1) by 50 basis points as part of what the central bank said will be a series of rate increases to combat soaring inflation in the US. Some investors may worry that rising interest rates will decrease equity valuations and therefore lead to relatively poor equity market performance. However, history offers good news: Equity returns in the US have been positive on average following hikes in the fed
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Should You Chase Dividend Stocks to Combat Inflation and Rate Hikes?

KEY TAKEAWAYS With inflation at its highest level in decades and the US Federal Reserve raising interest rates, investors may be wondering whether they should devote more of their portfolios to dividend-paying stocks. There’s no strong evidence that dividend stocks have delivered superior inflation-adjusted performance during periods of high inflation or rising interest rates. Investors can put themselves in a better position to achieve their financial goals by staying disciplined, diversifying broadly, and considering strategies designed to outpace or hedge
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Is It Time to Sell Stocks?

KEY TAKEAWAYS Soaring inflation and record market highs may leave investors wondering whether it’s time to adjust their portfolios. Researchers have examined a wide range of timing strategies based on earnings, dividends, interest rates, economic growth, and more. A recent Morningstar report showed that investors may be better off steering clear of tactical asset allocation strategies and avoiding making short-term shifts among asset classes. After touching record highs in early January, US stocks(1) have slumped, and investors have been confronted
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Navigating Geopolitical Events

The current conflict between Russia and Ukraine is an important reminder that geopolitical risk is a part of investing in global markets. Navigating geopolitical events requires expertise and flexibility. Dimensional’s systematic active approach is designed to adjust to new information in real time, including information about geopolitical events and their potential repercussions for markets. GLOBAL DEVELOPMENTS AND THEIR IMPACT Geopolitical events like military or economic conflicts can affect stock markets in many ways. These events are generally widely followed by
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All-Time-High Anxiety

KEY TAKEAWAYS Financial journalists periodically stoke investors’ record-high anxiety by suggesting the laws of physics apply to financial markets—that what goes up must come down. But shares are not heavy objects kept aloft through strenuous effort. They are perpetual claim tickets on companies’ earnings and dividends. If stocks have a positive expected return, reaching record highs with some frequency is exactly the outcome we would expect. Investors are often conflicted about record-high stock prices. They are pleased to see their
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Key Questions for Long-Term Investors

Whether you’ve been investing for decades or are just getting started, at some point on your investment journey you’ll likely ask yourself some of the questions below. Trying to answer these questions may be intimidating, but know that you’re not alone. Your financial advisor is here to help. While this is not intended to be an exhaustive list, it will hopefully shed light on a few key principles, using data and reasoning, that may help improve investors’ odds of investment
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‘Everything Screams Inflation.’ How to Interpret the Headlines

KEY TAKEAWAYS After last year’s economic shocks, we shouldn’t be surprised to see prices rebounding. But the potential for inflation is one among many factors investors take into account when agreeing on a price at which to trade. A look at headlines from the past 50 years shows the difficulty of timing markets around inflation expectations. Investors may be better served sticking to a long-term plan. How quickly things change. Two years ago, the New York Times reported, “Federal Reserve
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Swing in Small Value Stocks Shows Benefits of Staying the Course

Value stocks, or those with low relative prices, have outperformed higher-priced growth stocks in the US over the long term. Similarly, the stocks of smaller companies have fared better than the stocks of bigger ones in the US. But the performance of these stocks has varied at different points in history. As the global pandemic rocked markets in March 2020, large growth stocks outdid small value stocks by 19.6%, the greatest monthly margin on record. From March through September, the
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