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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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This Has Been a Test: Developing a Financial Plan You Can Stick With

Think back to December 2019. The economy was humming. Unemployment, interest rates, and inflation were at historically low levels. But then what happened? A global pandemic hit. By the end of March, the S&P 500 had dropped nearly 20% in value.1 Later in the year, scientists announced that they’d developed a vaccine, and markets roared back. FAANG stocks soared … before giving up a lot of gains.2 Meme stocks shot way up … and fell back down. Bitcoin and other
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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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Should You File for Social Security Early to Capture the Inflation Adjustment?

With all the talk about inflation these days, you may have heard the news that the 2023 cost-of-living adjustment (COLA) for Social Security benefits is 8.7%, the largest in four decades. If you are approaching or over age 62 and haven’t filed for your retirement benefits, you may be wondering if you should file earlier than planned so you do not miss out on the increase. The reality is that you do not need to file now to benefit from
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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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Understanding Emotions During Volatile Markets

Anger is a helpful emotion. We are angry when we see a person abused, and that anger compels us to intervene, helping the abused. But anger can be harmful when it compels us to say what we will soon regret, such as insulting a friend. We cannot learn to eliminate anger, but we can learn to control it through cognitive reflection. We can follow our parents’ advice: “Count till 10 when you are angry before you speak.” Fear and Hope
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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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