The last decade has been a challenge for many investors, especially those investing for the long term and retirement. Given declines in global stock markets, many investors have seen little to no real growth in their portfolios over this period. This Wealth Guide explains why investors’ portfolios may underperform in both bear and bull markets and incur substantial costs in the process. It also details the impact this chronic underperformance can have on achieving long-term financial goals.
For more free wealth management guides on portfolio performance and for expert consultation, visit SolidRockWealth.com.
I'm looking for 2 people that want to change their current situation.
See how $18, one time, can change your situation in one year. There is strength in numbers. Teamwork makes the dream work. Take a look here >>> http://tinyurl.com/kb7luuf
http://Kaea80.4c4all.com
http://flow77.4c4all.com
http://unitedlove1.4c4all.com
Asset Allocation and Factor Investing: An Integrated SolutionWindham Labs
This presentation is based on an article coauthored by Alain Bergeron, Mark Kritzman, and Gleb Sivitsky entitled “Asset Allocation and Factor Investing: An Integrated Approach” published in The Journal of Portfolio Management in 2018.
Insight Summit 2017: Intelligent Risk Taking
Portfolio construction today - Cliff Asness, Managing & Founding Principal, AQR Capital Management
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
On Thursday, April 27th, 2017, we heard from Windham's own client consultant, Jon Kazarian about best methods and practices for the portfolio construction and evaluation process.
Netwealth portfolio construction series - Building investment portfolios for ...netwealthInvest
Discover what markets could look like in the future and some of the strategies investors use in order to continue meeting their retirement goals with Josh Hall from Aberdeen Asset Management.
Netwealth portfolio construction series: Investment Moneyball - Taking advant...netwealthInvest
Discover how you can apply the Moneyball theory to potentially discover good investment opportunities at good prices by finding market anomalies to take advantage of. Paul Moore, founder and Chief Investment Officer of PM Capital, discusses.
Dato’ Yau is a chartered accountant and has more than 30 years experience in auditing, corporate finance and general management. Prior to joining Tropicana as the Group Chief Executive Officer, he was with Hong Leong Industries Bhd where he served as group managing director since September 2011 and prior to that, he was Sunway Holdings Bhd managing director since April 2001. He has also served well in various Sunway Group Berhad.
Five years after the worst economic crisis of our lifetimes, we are still feeling the after-shocks around the world.
Our recent financial past seems to herald one certainty for our collective
financial future: The investment world we grew up with has changed utterly.
Conventional wisdoms shaped by decades of high-return investing — first in equities from 1982 to 2000, then in fixed income markets over most of this century — need to be reexamined, revised, or even scrapped.
I'm looking for 2 people that want to change their current situation.
See how $18, one time, can change your situation in one year. There is strength in numbers. Teamwork makes the dream work. Take a look here >>> http://tinyurl.com/kb7luuf
http://Kaea80.4c4all.com
http://flow77.4c4all.com
http://unitedlove1.4c4all.com
Asset Allocation and Factor Investing: An Integrated SolutionWindham Labs
This presentation is based on an article coauthored by Alain Bergeron, Mark Kritzman, and Gleb Sivitsky entitled “Asset Allocation and Factor Investing: An Integrated Approach” published in The Journal of Portfolio Management in 2018.
Insight Summit 2017: Intelligent Risk Taking
Portfolio construction today - Cliff Asness, Managing & Founding Principal, AQR Capital Management
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
On Thursday, April 27th, 2017, we heard from Windham's own client consultant, Jon Kazarian about best methods and practices for the portfolio construction and evaluation process.
Netwealth portfolio construction series - Building investment portfolios for ...netwealthInvest
Discover what markets could look like in the future and some of the strategies investors use in order to continue meeting their retirement goals with Josh Hall from Aberdeen Asset Management.
Netwealth portfolio construction series: Investment Moneyball - Taking advant...netwealthInvest
Discover how you can apply the Moneyball theory to potentially discover good investment opportunities at good prices by finding market anomalies to take advantage of. Paul Moore, founder and Chief Investment Officer of PM Capital, discusses.
Dato’ Yau is a chartered accountant and has more than 30 years experience in auditing, corporate finance and general management. Prior to joining Tropicana as the Group Chief Executive Officer, he was with Hong Leong Industries Bhd where he served as group managing director since September 2011 and prior to that, he was Sunway Holdings Bhd managing director since April 2001. He has also served well in various Sunway Group Berhad.
Five years after the worst economic crisis of our lifetimes, we are still feeling the after-shocks around the world.
Our recent financial past seems to herald one certainty for our collective
financial future: The investment world we grew up with has changed utterly.
Conventional wisdoms shaped by decades of high-return investing — first in equities from 1982 to 2000, then in fixed income markets over most of this century — need to be reexamined, revised, or even scrapped.
Why Global Diversification Matters By Anthony Davidow Ap.docxgauthierleppington
Why Global Diversification Matters
By Anthony Davidow
April 02, 2018
Over the past few years, some investors have begun to question the merits of global asset
allocation. They wonder whether the risks abroad justify investing money outside the United
States—and whether there truly are diversification benefits to doing so. Some have even
challenged Modern Portfolio Theory itself, which emphasizes the long-term benefits of a
diversified portfolio.
In some ways it’s natural. It’s an unpredictable world, and investors worry about market
volatility both at home and abroad. Everything from political questions in the wake of the U.K.’s
“Brexit” vote in the summer of 2016 to the recent U.S. elections to anticipation of the Federal
Reserve raising rates have indeed contributed to market swings.
Moreover, in investing—as in sports and other areas of life—people often exhibit familiarity bias
(“home-country bias” in this case). We’re inclined to believe in and root for the things that we
know best. While this may be human nature, home-country bias limits an investor’s universe of
available opportunities. Worse, it may not be prudent given the nature of today’s global markets:
According to MSCI data, roughly half of all global companies are based outside the United
States, which corresponds to global gross domestic product (GDP) ratios.
Do you really want to limit your investment opportunities by half? How can you overcome
home-country bias?
As the saying goes…
Times like these show why the adage “don’t put all your eggs in one basket” is so vital for
investors. An investment sector that performs well one month or year might be a poor performer
the next. For example, as the chart below shows, emerging market stocks were the worst
performer in 2008—only to rebound back to the top in 2009 and also 2017. More recently,
international developed stocks were among the top performers in 2017, after placing near the
bottom in 2016.
Over the long run, there’s no discernible pattern to the rotation among the top performers, so it
doesn’t make much sense to concentrate all your investments in a particular region or asset class.
A globally diversified portfolio—one that puts its eggs in many baskets, so to speak—tends to be
better positioned to weather large year-over-year market gyrations and provide a more stable set
of returns over time.
How key asset classes compare to a diversified portfolio
Source: Morningstar Direct and the Schwab Center for Financial Research. Data is from January 1, 2008, to December 31, 2017. Asset class
performance represented by annual total returns for the following indexes: S&P 500® Index (U.S. Lg Cap), Russell 2000® Index (U.S. Sm Cap),
MSCI EAFE® net of taxes (Int’l Dev), MSCI Emerging Markets IndexSM (EM), S&P United States REIT Index and S&P Global Ex-U.S. REIT
Index (REITs), S&P GSCI® (Commodities), Bloomberg Barclays U.S. Treasury Inflation-Protection Securities (TIPS) Index, Bloo.
Investors often endure poor timing and planning as
many chase past performance. They buy into funds
that are performing well and initiate a selling spree
following a decline.
The Financial Review 40 (2005) 1--9Reflections on the Effi.docxtodd771
The Financial Review 40 (2005) 1--9
Reflections on the Efficient Market
Hypothesis: 30 Years Later
Burton G. Malkiel∗
Princeton University
Abstract
In recent years financial economists have increasingly questioned the efficient market
hypothesis. But surely if market prices were often irrational and if market returns were as
predictable as some critics have claimed, then professionally managed investment funds should
easily be able to outdistance a passive index fund. This paper shows that professional investment
managers, both in The U.S. and abroad, do not outperform their index benchmarks and provides
evidence that by and large market prices do seem to reflect all available information.
Keywords: efficient markets, stock market predictability
JEL Classifications: G12, G14
I have been an advocate of the efficient market hypothesis for over 30 years.
In my view, equity prices adjust to new information without delay and, as a result,
no arbitrage opportunities exist that would allow investors to achieve above-average
returns without accepting above-average risk. This hypothesis is associated with the
view that stock market price movements approximate those of a random walk. If
new information develops randomly, then so will market prices, making the stock
market unpredictable apart from its long-run uptrend. I suggested, largely in jest, that
∗Corresponding author: Chemical Bank Chairman’s Professor of Economics, Princeton University,
Princeton University—Bendheim Center for Finance; 26 Prospect Avenue; Princeton, NJ 08540; United
States; Phone: (609) 258-6445; Fax: (609) 258-0771; E-mail: [email protected]
This paper was presented to the 2004 Meetings of the Eastern Finance Association in Mystic, Connecticut.
1
2 B. G. Malkiel/The Financial Review 40 (2005) 1–9
a blindfolded chimpanzee throwing darts at the stock pages could select a portfolio
that would do as well as the experts.1 In fact, the correct analogy is to throw a towel
over the stock pages and simply buy an index fund, which buys and holds all the
stocks making up a broad stock-market index.
In recent years, many financial economists have come to question the efficient
market hypothesis. At least ex-post, there seem to be several instances where market
prices failed to reflect available information.2 Moreover, periods of large-scale irra-
tionality, such as the technology-internet “bubble” of the late 1990s extending into
early 2000, have convinced many analysts that the efficient market hypothesis should
be rejected.3 In addition, financial econometricians have suggested that stock prices
are, to a significant extent, predictable on the basis either of past returns or of certain
valuation metrics such as dividend yields and price-earning ratios.4
Although it is possible to cast doubt on the statistical robustness of many of the
predictable patterns that have been suggested,5 my skepticism is based on somewhat
different evidence. Surely, if market prices often faile.
The article discusses an alternative approach to experiencing the costs of index reconstitution, called “Asset Classes,” which allow the fund manager broader leeway as to when to buy or sell, along with a broader range of holdings. This discussion begins in the section called “Decision Two: Indexing or Asset Class Investing?”
The Asset Class approach, also referred to by others as "Factor Investing," is based on what has become to be called “Evidence Based Investing” due to roots discussed in the linked "Factor Investing" article, that come from academic (peer reviewed and repeatable results) foundation that continues to this day.
My blog post discussing this article is scheduled to post 8 Feb 2017 http://wp.me/p2Oizj-Hh
Jeff Pesta • LPL Financial
- Is it time to retire your strategy, manager, fund, or ETF? by Dave Moenning
- Dollar strength has uncertain implications
- The Anchored Momentum Indicator by Ron Rowland
- Converting positive feedback into new business (Steve Molesky, Kalos Capital Inc.)
Why Emerging Managers Now? - Infusion Global Partners WhitepaperAndrei Filippov
Traditional asset classes appear to offer uninspiring beta returns at present, and recent years’ hedge fund returns have disappointed both in magnitude and diversification benefits, likely reflecting capacity pressures associated with the concentration of AUM and inflows with larger funds. We argue that, by contrast, Emerging hedge funds offer a rich opportunity set with far fewer capacity issues where skilled managers with concrete competitive advantages in less efficient, smaller capitalization market segments can generate better, more sustainable and less correlated excess returns. Emerging managers do involve more investment and operational risk than larger peers; to that challenge we offer some suggestions on a thoughtful and rigorous approach to constructing an Emerging Managers allocation and balancing effective due diligence with scalability.
Phone Charges Per Roommate for FebruaryBasic Monthly Service Rat.docxrandymartin91030
Phone Charges Per Roommate for February
Basic Monthly Service Rate
20.44
Long Distance Charges for Each Roommate:
Jamesson
Coleman
Depindeau
Struthers
5.65
0.25
1.35
3.75
0.45
0.65
2.15
0.88
1.68
0.56
3.78
1.23
4.15
5.77
0.95
1.25
0.88
3.67
1.95
3.88
Total Long Distance
7.78
10.53
13.05
13.52
Share of Basic Rate
5.11
Total
12.89
15.64
18.16
18.63
???
Page
??? (???)
11/25/2013, 10:33:14
Page /
The Role of PRivaTe equiTy in u.S. CaPiTal MaRkeTS
The Role of Private equity in u.S. Capital Markets
Robert J. Shapiro and nam D. Pham
october 2008
S O N E C O N
1The Role of PRivaTe equiTy in u.S. CaPiTal MaRkeTS
The Role of Private equity in u.S. Capital Markets
Robert J. Shapiro and nam D. Pham1
inTRoDuCTion
Private equity transactions and operations in the United States have grown dramatically over the last genera-
tion. The number and value of U.S. private buyout-related deals rose from 12 transactions in 1970, involv-
ing less than $13 million in direct capital raised and invested, to 2,474 deals in 2007 for which buyout firms
directly raised and invested approximately $70 billion (net of leverage or borrowing).2 Including leverage, the
value of U.S. buyout deals averaged about $100 billion per-year from 2000 to 2005.3 However, these sharp
increases in private-equity buyouts, virtually all of them leveraged and some very highly so, have raised
concerns about the economy’s vulnerability to a systemic financial market event if a large firm, or a series of
firms purchased in a highly-leveraged buyout or a major private equity firm should suddenly fail. These con-
cerns have been heightened by the systemic crisis and enormous costs triggered by the large-scale failures
of mortgage-backed securities and their derivatives, including the collapse of Bear Stearns, Lehman Broth-
ers, AIG, Fannie Mae, Freddie Mac and Countrywide Financial Corp., and the severe financial stresses and
extraordinary government interventions on behalf of other major financial institutions. This report examines
the basis for these concerns. Based on the data and analysis, we conclude that the organization of private
equity buyout funds and the nature and dimensions of their investments are fundamentally different from the
conditions which have produced our current systemic instability, and that the private equity sector does not
seem to present a systemic risk for U.S. capital markets or the economy.
Private equity funds play a distinctive role in U.S. financial markets and the economy by organizing and chan-
neling capital and skilled managers to acquire and operate firms based on their analysis of the returns those
firms could generate if new management brings about significant changes in those firms’ operations. Private
equity investors may buy struggling firms; they may purchase solid but unwanted divisions of conglomerates,
and they may acquire strong companies with significant growth potential. Regardless, their role contrasts
clearly wit.
Concepts that inform a market-based investment approach, grouped in four categories: Market Equilibrium, Diversification, Dimensions of Returns, and Investor Discipline.
Similar to 8 Threats To Portfolio Performance | A Series Of Wealth Guide by Solid Rock Wealth Management (20)
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
Seminar: Gender Board Diversity through Ownership NetworksGRAPE
Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
8 Threats To Portfolio Performance | A Series Of Wealth Guide by Solid Rock Wealth Management
1. 8 Threats to Portfolio Performance
Presented by: Chris Nolt, LUTCF, Regsitered Investment Advisor Representative
An Educational Resource From
Solid Rock Wealth Management
The last decade has been a challenge for many investors, especially those investing for the long term and retirement.
Given declines in global stock markets, many investors have seen little to no real growth in their portfolios over this period. For exa
$10,000 invested in the S&P 500 Market Index in 2000, was worth just $10,681 at the end of 2011. And this does not take into acco
inflation, investment fees and taxes.1
This whitepaper explains why investors’ portfolios may underperform in both bear and bull markets and incur substantial costs in th
cess. It also details the impact this chronic underperformance can have on achieving long-term financial goals.
Threat 1: The Expenses of an Active Market
Most of us would like to beat the market, but as we’ll explore
in this whitepaper, even many professional money managers
have had a hard time performing better than the market. To
understand why, it is helpful to begin with some definitions.
Active investors (and active money managers) attempt to
out-perform stock market rates of return by actively trading
individual stocks and/or engaging in market timing — deciding
when to be in and out of the market.
Those investors who simply purchase “the market” through
index or asset class mutual funds are called passive or “mar-
ket” investors.
Active mutual fund managers are typically compared to a
benchmark index. For example, large cap mutual funds are
often compared to the S&P 500 index. To beat the index, an
active mutual fund must perform better than the weighted av-
erage return of those companies in the index. And they must do
so while including fees, taxes, trading costs, etc. so they report
a real rate of return.
A lot of time and money is spent attempting to “beat” the
market. Professor Ken French of Dartmouth’s Tuck School of
Business estimates that investors collectively spend $102 bil-
lion per year in trying to achieve above-market rates of return.2
Professor French added up the fees and expenses of U.S.
equity mutual funds, investment management costs paid by
institutions, fees paid to hedge funds, and the transaction costs
paid by all traders, and then he deducted what U.S. equity
investors would have paid if, instead, they had simply bought
and held a passive fund benchmarked to the overall stock mar-
ket. This $102 billion difference, Professor French says, is what
investors, as a group, pay trying to beat the market.
Threat 2: Many Active Mutual Fund Managers Have Failed
to Beat the Market
As you can see from this chart, over the five-year cycle from
2007 to 2011, the vast majority of active mutual funds under-
performed the stock and bond markets.
Though past performance is no guarantee of future results,
notice how many of the money managers’ average annual re-
turns were below the average returns of their benchmarks. For
example the average return for all Large Cap funds during this
period was more than 1% below the Large Cap S&P 500 Index.
Mutual Fund Manager Performance from 2007 – 2011
Source: Standard and Poor’s Index Versus Active Group, March 2012. Indexes
are not available for direct investment. Their performance does not reflect
11
2. the expenses associated with the management of an actual portfolio. The
fund returns used are net of fees, exclud- ing loads. Returns are based upon
equal-weighted fund counts. The data assumes reinvestment of income and
does not account for taxes or transaction costs. The risks associated with
stocks potentially include increased volatility (up and down movement in the
value of your assets) and loss of principal. Bonds are subject to risks, includ-
ing interest rate risk which can decrease the value of a bond as interest
rates rise. Investing in foreign securities may involve certain additional risks,
including exchange rate fluctuations, less liquidity, greater volatility, different
financial and accounting standards and political instability. Past performance
is not a guarantee of future results.
years now.
Their May 2009 Indices Versus Active Funds Study specifically
focuses on the bear market of 2008 and concludes that “the
belief that bear markets favor active management is a myth.”5
In the same study, Standard and Poor’s identified similar results
for the 2000 to 2002 bear market. In both that bear market and
the one in 2008, a majority of active funds underperformed their
respective S&P Index for all U.S. and international equity asset
classes. In aggregate in 2008, actively managed funds under-
performed the S&P 500 Index by an average of 1.67%.6
One of the greatest challenges for active managers is the
extreme difficulty in forecasting the economy or accurately
predicting the market’s direction in advance. This makes it hard
for them to anticipate bear and bull markets.
In fact, Wall Street has a notoriously bad forecasting record: its
consensus forecast has failed to predict a single recession in
the last 30 years.7
Looking back on the forecasts made for the markets at the
beginning of 2008, just before the greatest bear market since
the Great Depression, many of them turned out to be quite
optimistic.
At the end of 2007, Newsday gathered market predictions
from “eight major Wall Street Securities firms” and found an av-
erage price target for the S&P 500 by year-end 2008 of 1,653,
representing a 12% increase over 2007. And at the beginning of
2008, USA Today similarly surveyed nine Wall Street invest-
ment strategists. They were a little less optimistic, expecting an
average price target for the S&P 500 for the year of 1606, only
an 8.6% increase. Of course, we now know that the S&P 500
Index declined by 37% in 2008. And many of those major Wall
Street firms experienced their own unforeseen troubles, includ-
ing being sold or merged.
If Wall Street experts can’t even predict recessions or the
direction of the market, it is questionable how active managers
can successfully pick individual stocks, in bear markets or bull
markets, especially since a stock’s performance is often very
sensitive to economic and market conditions.
Threat 4: Only a Few Stocks Have Generated
Strong Long-Term Returns Over The Last 20 Years
The performance of individual stocks differs greatly even though
stocks collectively have historically provided strong returns over
long investment horizons.
While some managers were able to beat the market, this
raises the question: was it luck or skill?
Universe of Active Mutual Fund Managers 1975-2006
.6% outperformed their
benchmark due to skill
In a 2008 research study3 — perhaps the most compre-
hensive ever performed — Professors Barras, Scaillet, and
Wermers used advanced statistical analysis, to evaluate the
performance of active mutual funds. They looked at fund per-
formance over a 32-year period, from 1975-2006.
The study concluded that after expenses, only 0.6% (1 in
160) of active mutual funds actually outperformed the market
through the money manager’s skill.
This low number “can’t eliminate the possibility that the few
[funds] that did were merely false positives,” just lucky, in
other words, according to Professor Wermers.4
Threat 3: Few Active Mutual Funds Have Outperformed in
Bear Markets
Some have claimed that active managers have a distinct ad-
vantage in bear markets. They can get out of troubled stocks
and sectors early and avoid the worst of a downturn.
Standard and Poor’s has been measuring the performance of
active managers against their index counterparts for several
2 2
3. Looking at the University of Chicago’s CRSP total market
equity database as representative of the U.S. market for the
period 1926-2011, only the top-performing 25% of stocks
were responsible for the market gains during this timeframe.
The remaining 75% of the stocks in the total market database
collectively generated a loss of -0.7%. This example demon-
strates the difficulty in selecting the individual stocks that will
perform better or even in-line with the broad equity market. It
is important to note that past performance in any security is
not indicative of future results.
Threat 5: Missing the Best Days in the Market Can Lower
Returns
Many active investors try to move much or all of their money out
of the market when they believe a bear market or down cycle
is imminent. However, this may result in missing not just down
days but some of the best (most bullish) days in the markets as
well.
This mistake can be dangerous to your wealth!
Missing even a few of the best days of the market can have a
substantial impact on a portfolio. If you had invested $100,000
in 1970, it would be worth $5,066,200 in 2011. Missing just five
of the best days would have cut your returns by almost $1.8
million to $3,294,000.8
No one knows when those “best days” will happen, yet some
people prefer to try and ride out a bear market by pulling out of
the market or just staying uninvested on the sidelines.
Even if you’d missed just one day — the single best day —
between 1970 and 2011, you would have made a $500,000
mistake.
Threat 6: Lack of Patience and Discipline Can Be Costly
As the chart below shows, a study by the research organization
Dalbar found that from 1992 – 2011, the average investor did
substantially worse than major indices. Sometimes, we really
can be our own worst enemies. Up and down markets can be
emotional events, but as the study found, letting emotion affect
your investing can be very damaging.
In this study, the average investor returns were calculated as
the change in assets after excluding sales, redemptions and ex-
changes during the period. This method of calculation captures
realized and unrealized capital gains, dividends, interest, trading
costs, sales charges, fees, expenses, and any other costs.
According to this study, the average equity investor had an-
nual returns of just 3.5% during this time frame. Over the same
period, the S&P 500 returned an annual average of 7.8%. This
almost 55% decrease in average annual returns experienced by
the average investor is the cost of not exercising patience and
discipline, of letting emotion guide investing instead of reason.
Even in fixed income, investors made expensive mistakes. While
the Barclay’s Aggregate Bond Index returned 6.5% over this
period, the average fixed income investor had an annual return
of .94%, underperforming even inflation.
Results based on the CRSP 1-10 Index. CRSP data provided by the Center
for Research in Security Prices, University of Chicago.
Past performance is not indicative of future results. Indexes are unmanaged
baskets of securities in which investors cannot directly invest. The data
assume reinvestment of all dividend and capital gain distributions; they do
not include the effect of any taxes, transaction costs or fees charged by an
investment advisor or other service provider to an individual account. The
risks associated with stocks potentially include increased volatility (up and
down movement in the value of your assets) and loss of principal. Small
company stocks may be subject to a higher degree of market risk than the
securities of more established companies because they tend to be more
volatile and less liquid.
One might ask: if a small percentage of stocks could possibly
account for the market’s long-term returns, why not avoid all
the headaches and just invest in these top-performing stocks?
Since past performance is not indicative of future results, a
portfolio of even the most carefully chosen stocks could easily
wind up with none of the best-performing stocks in the mar-
ket— and thus could possibly produce flat or negative returns
for many years. As the performance of active managers versus
indices shows, very few managers are accomplished stock
pickers.
Missing out on even a handful of the top-performing stocks
can leave you well short of market returns. According to an
article by William J. Bernstein in Money Magazine (05/09), the
only way you can be assured of owning all of tomorrow’s top-
performing stock is to own the entire market.
3 3
4. Average Investor vs. Major Indices 1992 – 2011 are not properly compensated for.
Markets can be chaotic, but over time they have shown a strong
relationship between risk and reward. This means that the com-
pensation for taking on increased levels of risk is the potential
to earn greater returns. According to academic research by Pro-
fessors Eugene Fama and Ken French, there are three “factors”
or sources of potentially higher returns with higher correspond-
ing risks.9
1. Invest in Stocks
2. Emphasize Small Companies
3. Emphasize Value Companies
Average stock investor and average bond investor performances were used
from a DALBAR study, Quantitative Analysis of Investor Behavior (QAIB),
03/2012. QAIB calculates investor returns as the change in assets after
excluding sales, redemptions, and exchanges. This method of calculation
captures realized and unrealized capital gains, dividends, interest, trading
costs, sales charges, fees, expenses, and any other costs. After calculating
investor returns in dollar terms (above), two percentages are calculated:
Total investor return rate for the period and annualized investor return rate.
Total return rate is determined by calculating the investor return dollars as a
percentage of the net of the sales, redemptions, and exchanges for the pe-
riod. The fact that buy-and-hold has been a successful strategy in the past
does not guarantee that it will continue to be successful in the future.
A groundbreaking study by leading institutional money manager,
Dimensional Fund Advisors LP, found that exposure to these
three risk factors accounts for over 96% of the variation in
portfolio returns.10
So, the presence or absence of Small and Value companies in
your portfolio as well as your exposure to stocks may have a
substantial impact on performance. And additional asset class-
es, such as Real Estate and International, help provide further
portfolio diversification.
To take a historical example: As the chart below shows, $1
invested in 2002 in a diversified equity portfolio including ex-
posure to Small, Value, Real Estate, International and Emerging
Markets was worth $1.78 at the end of 2011.
Growth of $1 Investment Diversified Equity Portfolio
January 1, 2002 - December 31, 2011
Threat 7: Lack of Diversification
“Don’t put all of your eggs in one basket.”
As an investor, you may have heard this old saying used to
emphasize the need for a diversified portfolio.
Though diversification does not guarantee a profit or protect
against a loss, a combination of asset classes may reduce
your portfolio’s sensitivity to market swings because different
assets — such as bonds and stocks — have tended to react
differently to adverse events. For example, the stock and bond
markets have historically tended not to move in the same
direction; and even when they did, they usually did not move
to the same degree.
Some long-term investors believe that investment success has
less to do with how well you pick individual stocks or the tim-
ing of when you get in the markets and more to do with how
well your portfolio has been diversified.
Just owning 10 different mutual or index funds, for example,
does not mean you are effectively diversified. These mutual
funds may have similar holdings or follow similar investment
styles.
In addition, investors who are not properly diversified may
have more risk in their portfolio or are taking risks that they
Diversified Equity Portfolio is weighted as 21% to the Dow Jones Total Market
Index, 18% to the Russell 1000 Value Index, 15% to the Russell 2000 (Small
Cap) Index, 26% to the MSCI EAFE Index (net div), 10%to the MSCI EAFE Smal
Cap Index, 5%to the MSCI Emerging Markets Index, and 5% to the Dow Jones
U.S. Select REIT IndexData Sources: S&P 500 Index data are provided by
Standard & Poor’s Index Services Group, Russell Index data provided by The
Russell Company, www.russell.com Dow Jones Wilshire Index data provided
by www.dowjo- nesindexl.com; MSCI Index data provided by Morgan Stanley
4 4
6. Chris Nolt is the owner of Solid Rock Wealth Management and Solid Rock Realty Advisors, LLC, located in Bozeman, Montana. Solid Rock We
Management is an independent, fee-based wealth management firm that provides investment consulting plus other wealth management
services for high net worth individuals and families. Solid Rock Wealth Management uses a comprehensive planning approach with a team of
financial professionals which addresses retirement planning, investment planning, estate planning, tax planning, risk management, wealth pres-
ervation and other components.
Solid Rock Realty Advisors, LLC assists investors who are seeking secure income producing real estate investments. We specialize in office
buildings leased to the U.S. Federal Government and primarily work with investors who are purchasing properties through a 1031 tax-deferred
exchange. For the acquisition and management of these properties, we have teamed up with two national firms who for the last 18 years have
focused exclusively on the U.S. Federal Government Agency real estate market.
Chris grew up in Lewistown, Montana and received a Bachelors degree in business from Montana State University in 1987. Chris entered the
financial services industry in 1989 and for the last 24 years has been helping people with their investment, retirement and estate planning
needs. Chris is passionate about helping people grow and preserve their wealth and he has built many long lasting relationships over the years
with his sincere educational approach. He has earned the designations of Certified Retirement Financial Advisor, Certified Senior Advisor and
Life Underwriter Training Council Fellow. He holds series 7, 66 and 24 securities licenses, as well as a Montana insurance license and a Montana
real estate license. An avid outdoorsman and devoted Christian, Chris lives in Bozeman.
For more information or to request other Wealth Guides, call
406-582-1264 or send an e-mail to: chris@solidrockwealth.com.
Solid Rock Wealth Management and Solid Rock Realty Advisors, LLC
2020 Charlotte Street, Bozeman, MT 59718 • 406-582-1264
www.solidrockwealth.com www.solidrockproperty.com
Securities and advisory services offered through Independent Financial Group, LLC, a registered broker-dealer and investment advisor. Member FINRA/SIPC. Solid Rock Wealth
Management and Solid Rock Realty Advisors, LLC are not affiliated entities of Independent Financial Group, LLC.
7 6