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Insights



A Regression to Long-Term Means?

“A Man’s inability to see the power of regression to the mean leaves him blind to the nature of the world around him.” Michael Lewis, The Undoing Project: A Friendship That Changed Our Minds.   Reviewing historical annual long-term equity premiums and returns, we can conclude the following: US Small companies outperform US Large Companies by 2.02% International Small companies outperform International Large companies by 4.91% US Value companies outperform US Growth companies by 3.18% International Value companies outperform International
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Why 401k’s Work So Well

As I sit down and meet with new clients or review my existing clients’ net worth, inevitably one of their largest assets is their 401k. In fact, other than business owners who may have earned most of their wealth perhaps from the sale of a business, at least 50% of most client assets are held in 401k’s or IRAs that resulted from old 401k’s rolled over into those IRAs. Why do 401k’s work so well, and how much more wealth
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Planning for Uncertain Times

With last month’s election and ongoing health and economic concerns related to COVID-19, uncertainty remains high, as it has for most of 2020. Unfortunately, this is likely to continue well into 2021 on health, financial and societal fronts. As investors, it’s never enjoyable to navigate periods like this, so we wanted to step back and reinforce our perspective on financial markets as we head into the close of 2020 (and if you are anything like me, it can’t come quickly
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Fixed Income’s Place in Your Portfolio

For many years, we have experienced historically low interest rates, and expectations are that the Federal Reserve will maintain is near-zero rate policy through the end of 2022 or until it sees inflation rise. This means that your investments in fixed income securities, such as cash, certificates of deposit and high-quality bonds, are paying relatively little. If you reach for higher yields by turning to lower-quality bonds or move into more equities looking for greater returns, you take on more
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Optical Illusions in Investing

Do you remember “The Dress”? From way back in 2015? Sure, hundreds of internet sensations memorable for one reason or another have gone viral over the years, but this one made a splash by any standard. Is the dress white and gold? Or is it really black and blue? Debate raged and The Dress forever earned a place in pop culture. It seems, though, that everyone at the time simply forgot about optical illusions and the tricks our brains can
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An Exceptional Value Premium

It’s probably not news to most value investors that the value premium has struggled over the past decade. What might be news is just how extreme an outlier recent value stock underperformance represents. The periodic returns for value versus growth in Exhibit 1 convey a stark contrast between recent years and the longer run of evidence, suggesting the past decade’s disappointing premium was disproportionally impacted by the last three years. Over the first seven years of the last decade (July
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Why Investors Might Think Twice About Chasing the Biggest Stocks

As companies grow to become some of the largest firms trading on the US stock market, the returns that push them there can be impressive. But not long after joining the Top 10 largest by market cap, these stocks, on average, lagged the market. • From 1927 to 2019, the average annualized return for these stocks over the three years prior to joining the Top 10 was nearly 25% higher than the market. In the three years after, the edge
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Tune Out the Noise

There’s a reason that investors tend to only hear about “looming” market doom or “imminent” market growth. While many news outlets have an incentive to draw viewer attention with wildly bullish or bearish predictions, these sensationalized views may be a distraction to a sound investment approach. When tempted to make a radical change to your investment portfolio based on these headlines, it is important to recall some basic fundamentals to keep your plan on track. Tune out the noise: “Markets
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How Real Is Post-Pandemic Inflation Risk?

Governments around the world have made unprecedented efforts to support the global economy in response to COVID-19 by increasing spending and getting cash into the hands of both consumers and companies. Steps taken thus far may well have been necessary to help fight the pandemic’s economic fallout – but at what cost? Pundits are starting to point their collective finger at a potential dramatic increase in inflation, which is the idea that currency depreciates – buys less – as time
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When It’s Value vs. Growth, History Is on Value’s Side

There is pervasive historical evidence of value stocks outperforming growth stocks. Data covering nearly a century in the US, and nearly five decades of market data outside the US, support the notion that value stocks—those with lower relative prices—have higher expected returns. Recently, growth stocks have enjoyed a run of outperformance vs. their value counterparts. But while disappointing periods emerge from time to time, the principle that lower relative prices lead to higher expected returns remains the same. On average,
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