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Insights



Tesla’s Charge Reveals Weak Points of Indexing

Index additions and deletions are typically a routine affair, but the recent announcement by S&P that Tesla would be added to the widely tracked S&P 500 Index stirred up quite a lot of attention. No surprise, given that Tesla is the largest company to ever join the index and, at the time of its addition on December 18, 2020, became the sixth-largest company in the S&P 500. On news of the announcement on November 16, Tesla’s stock price jumped 8.2%
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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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Refocus Post-Election Stress to Your Financial Plan

The 2020 election is moving closer to conclusion, and like many investors, you may have mixed emotions about the future. If you’re looking for clarity and guidance, here are key points for refocusing that post-election stress and anxiety back to your financial plan. Avoid acting hastily based on election results. Equity markets moved higher in the week following the election. However, experts’ consistent point of view is to avoid reacting to immediate news related to the election. Avoid assuming anyone
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How Much Impact Does the President Have on Stocks?

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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