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Insights



The Difference Between a Forecast, a Wish, and a Worry

David Booth DFA Chairman and Founder When I was growing up, our local newspaper, the Kansas City Star, was full of news and had one page for opinion. After decades of cable news and nonstop digital postings, I see more opinions these days than news. That’s not a bad thing. But when it comes to investing, it’s crucial to remember the difference between news and opinion, and how they are sometimes used to forecast the future. Any time the government
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People Have Memories. Markets Don’t.

Start the new year off with a clean slate—just like markets do every day. One of the best things about markets is that they don’t have memories. They don’t remember what happened last week or last year. They don’t even remember what happened a minute ago. Prices change based on what’s happening right now and what people think will happen in the future. People have memories. Markets don’t. And that’s a good thing. So as you start 2023, take a
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The Rewarding Distribution of US Stock Market Returns

Annual stock market returns are unpredictable, but “up” years have occurred much more frequently than “down” years in the US. That may be reassuring to investors, especially if they find market downturns unsettling. The US stock market posted positive returns in 75% of the calendar years from 1926 through 2021. The market gained an annualized average of 10.2% during this period. Yet nearly two-thirds of yearly observations were at least 10 percentage points above or below the average. Another noteworthy
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Time the Market at Your Peril

Technology enables immediate access to everything wherever and whenever we want it. In many cases, such as staying in touch with friends and family, or learning about world events, that’s a good thing. However, when it comes to investing and money management, my fear is that faster and easier ways of investing will allow people to lose more money faster and easier. As access to investing expands, it becomes even more important to adopt an investment plan that doesn’t try
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Markets Don’t Wait for Official Announcements

Some investors may worry about the stock market sinking after a recession is officially announced. But history shows that markets incorporate expectations ahead of economic reports. The global financial crisis offers a lesson in the forward-looking nature of the stock market. The US recession spanned from December 2007 to May 2009(1), as indicated by the shaded area in the chart. But the official “in recession” announcement came in December 2008—a year after the recession had started. By then, stock prices
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Elect to Leave Your Portfolio Alone

On November 8, US voters will cast their ballots for all 435 seats in the House of Representatives and 35 seats in the Senate. Many investors are concerned with the effect of election results. Do past results suggest a useful strategy to deal with election-year uncertainty? The answer is yes. For the 96-year period ending in 2021, the S&P 500 Index (with dividends reinvested) posted an average return of 12.33% for all calendar years and results were negative in roughly
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Investing Through Tough Times in Four Charts

The U.S. stock market continues to record losses in 2022, and the U.S. economy shows signs that we are either in or may soon face a recession. Four charts help illustrate why we think sticking with stocks through tough times is still likely the better path forward for investors than jumping in and out of the market. What Does a Recession Mean for Stock Returns? While not official, there’s reason to believe the U.S. is currently in a recession. Two
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Liquid Alternatives: Panacea, or Just a Pain?

KEY TAKEAWAYS Liquid-alt investments claim they deliver higher potential returns and lower correlations to stocks and bonds—but have fallen short. From June 2006 to June 2022, they underperformed broad indices with higher volatility than fixed income. Investors seeking to increase expected returns and manage risk may do so more reliably using diversified stock and bond strategies. In the face of broad equity and fixed income market downturns, some investors may be tempted by the siren call of alternatives. These investments
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Go Global for Diversification That Travels Well

US-based investors may believe they know America best. Accordingly, they are liable to put the bulk of their investments in stocks and bonds of US-based companies and in US federal and municipal fixed income securities. Given the size and relative safety of this market, that may seem a sound approach. Yet this strategy has some holes. “Home bias”(1) can limit your investment opportunities and constrain your ability to benefit from diversification. Consider these revealing numbers: The US stock market is
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What History Tells Us about the Market and Control of Congress

Nearly a century of US stock market returns suggests that making investment decisions based on control of the chambers of Congress is unlikely to lead to better investment outcomes. From 1926 to 2022, stocks trended higher regardless of whether Democrats or Republicans controlled the House and the Senate, or whether control was mixed. Actions by Congress and the other branches of the federal government may impact returns, but other factors like geopolitical events, interest rate changes, and technological advances do
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