Posts filed under “Asset Allocation”
My Sunday Washington Post Business Section column is out. As a follow up to our previous discussion of the World’s Greatest Trader®, this morning, we look at the Worlds Greatest (and Worst) Market Timer®.
As we did last time out, we assumed magical powers for our theoretical trader, giving him the ability to bottom tick the market. Surprises aplenty follow.
Here’s an excerpt from the column:
“Over the past month, we looked at how you would have fared if you were an uncanny stock picker who consistently beat the market by 30 percent or so (What if You Were the World’s Greatest Trader® ? and World’s Greatest Trader Revisited). As it turns out, capital gains taxes and other expenses take a giant bite. Even a very successful active trader barely keeps up with the long-term passive indexer.
This week, we consider: What if you were the World’s Greatest Market Timer?
Imagine: You, the individual investor, have an uncanny skill at timing markets and picking the lows. Your prescience allows you to buy near the bottom of every major crash. Anytime the market has a substantial drop, you manage to make a purchase of broad indexes at advantageous prices. Similar to the World’s Greatest Trader, you set up an online account, and then you are off to the races, timing markets with the best of them.
How would you imagine a trader with these skills would do?”
The answer turns out to be rather surprising . . .
Time, not timing, is key to investing success
Washington Post, August 24, 2014
Source: Novel Investor Have a look a the chart above (click on the chart for a larger interactive version). This chart ranks the past 15 years of returns for eight major asset classes (large-cap stocks, small-cap stocks, developed-market stocks, emerging-market stocks, real estate investment trusts, high-grade bonds, high-yield bonds and cash). We can divide…Read More
Source: BCA Today’s chart comes to us from Chen Zhao of the Bank Credit Analyst, who writes in a research report: The financial services industry have (sic) begun to feel the pinch of the fallout from low volatility and zero interest rates. The average return delivered by hedge funds has fallen sharply since the…Read More
Nice short list from Rick Ferri: There are other reasons to hire an adviser even if you’re an index believer. Here is a partial list: To put space between you and your investments so that you don’t make emotional decisions. To do detailed research on asset allocation or index funds because you would rather spend…Read More
Source: JP Morgan Whenever anyone asks me about my favorite sector or market for the coming year, I like to show the table above. While not quite a quintillion-to-one bet, the table reveals what a challenge it is to consistently identify the best asset class for the coming year. No one seems to be…Read More
Yesterday, Business Insider posted a huge piece, wherein they ask various folks for their best idea for a decade. With the low key headlne, Wall Street’s Brightest Minds Reveal Their Best Investment Ideas For The Next Decade, here is how I responded: Financial planning: “As it turns out, that is an easy question: Our own…Read More