Posts filed under “Mathematics”
1. Breakout Star Of The Election Season You don’t have to be running to win. You don’t have to be number one. Concentrate on being a member of the scene and surviving. 2. Paid His Dues We’re so used to here today, gone tomorrow. Young people thrust into the spotlight who then disappear. Rebecca Black…Read More
I recently had an interesting conversation with a Real Estate agent (whom I know for a long time) about local sales and prices. She had seen an increase in total units, but was surprised at the increase in home prices that have been reported. Having sold multiple identical units in the same waterfront condo complex,…Read More
This Sunday morning we reach the ninth in our series of investor errors. This one’s title comes from the standard Wall Street boilerplate disclaimer that is on everything investment related: “Past performance is no guarantee of future results.”
Despite its ubiquity, it is routinely ignored by investors.
Every hot mutual fund manager who is on the cover of some investing magazine, every trader who made a one shot killing, every strategist who accidentally stumbled into a lucky call: Many people chase the gurus, looking for a little magic that will make them wealthy.
Sorry, it doesn’t work that way.
Consider: The Morningstar mutual fund rating 5 star ranking attracts lots of new investors and lots fresh dollars. The primary factor in the rating is (can you believe it?) past performance. This despite a Morningstar study that found 5 star funds mostly underperform — my assumption is it’s a case of simple mean reversion. As it turns out, the fund’s expense ratio is a much better predictor of performance (See results here).
When making any investment, make sure you are not merely chasing a hot quarter or two. Note that there are 10,000 hedge funds and 12,000 mutual funds and very few consistent managers generating sustainable, repeatable returns.
1. Excess Fees
2. Reaching for Yield
3. You Are Your Own Worst Enemy
4. Asset Allocation vs Stock Picking
5. Passive vs Active Management
6. Mutual Fund vs ETFs
7. Neglecting the Long Cycle
8. Cognitive Deficits
click for larger graphic Source: The Pain in Spain > Real Estate comprised 79% of Spanish household assets, according to Jon Carmel at Carmel Asset Management (he credits the chart above to Oliver Wymann). That is 50% more than many other European countries, double the UK and triple the US. I would expect mean…Read More
So I get this email from a colleague today offering me “proof” that global warming is a scam. His “overwhelming evidence”? A letter from 49 former NASA Scientists. NASA is in open revolt over climate change! Wow, 49 Scientists? That’s really impressive (at first glance!) Let’s see if it holds up to scrutiny. Whenever I…Read More