This document provides guidance on pursuing a better investment experience. It recommends embracing market pricing, not trying to outguess the market, resisting chasing past performance, letting markets work for you long-term, considering drivers of returns like company size and profitability, practicing smart diversification globally, avoiding market timing, managing emotions, focusing on long-term advice over entertainment, and controlling what you can like having a tailored plan.
10 Key principals of using evidence investing to improve your odds of success in reaching your goals. This includes embracing the market and using diversification.
The Cogent Advisor, and independent wealth manager in Chicago helping successful professionals simplify their complex financial lives and reach their goals. 312-382-8388. www.thecogentadvisor.com.
Stop Wasting Your Money & Start Having a Better Investment ExperienceAndreas Scott, CFP®
To have a better investment experience, people should focus on the things they can control. If you follow these ten steps you will have a better investment experience.
10 Key principals of using evidence investing to improve your odds of success in reaching your goals. This includes embracing the market and using diversification.
The Cogent Advisor, and independent wealth manager in Chicago helping successful professionals simplify their complex financial lives and reach their goals. 312-382-8388. www.thecogentadvisor.com.
Stop Wasting Your Money & Start Having a Better Investment ExperienceAndreas Scott, CFP®
To have a better investment experience, people should focus on the things they can control. If you follow these ten steps you will have a better investment experience.
The Need for Diversification (“Skittles Chart”) Asset Class Index Performance
The “Skittles Chart” is a great way to show investors the randomness of investment returns from one year to the next, reinforcing the potential benefits of Asset Class Investing as an alternative to active management.
Still keeping your money on the sidelines because you are nervous about the market? Take a look at this article to see some of the unintended risks of inaction.
What can we learn?
1. The past does not predict the future.
2. Over the long term, returns revert to their mean.
3. It pays to diversify.
Blog scheduled to post 6 Jan 2016 http://wp.me/p2Oizj-Eh
There is a cost to indexing that most investors are unaware of. It is called “reconstitution.”
A blog post is scheduled for 8 Feb 2017 discussing this article.
http://wp.me/p2Oizj-Hh
A Powerpoint version of a operations order given at the Platoon level. This was given at an annual training with iterations of dry, blank and live ammunition. The event consisted of combined arms with serval force multipliers.
The Need for Diversification (“Skittles Chart”) Asset Class Index Performance
The “Skittles Chart” is a great way to show investors the randomness of investment returns from one year to the next, reinforcing the potential benefits of Asset Class Investing as an alternative to active management.
Still keeping your money on the sidelines because you are nervous about the market? Take a look at this article to see some of the unintended risks of inaction.
What can we learn?
1. The past does not predict the future.
2. Over the long term, returns revert to their mean.
3. It pays to diversify.
Blog scheduled to post 6 Jan 2016 http://wp.me/p2Oizj-Eh
There is a cost to indexing that most investors are unaware of. It is called “reconstitution.”
A blog post is scheduled for 8 Feb 2017 discussing this article.
http://wp.me/p2Oizj-Hh
A Powerpoint version of a operations order given at the Platoon level. This was given at an annual training with iterations of dry, blank and live ammunition. The event consisted of combined arms with serval force multipliers.
Understanding micro elements in film openingsVishal Dhariwal
Extreme close up
Close up
Medium Shot
Long Shot
Extreme long shot
Track
Pan
Tilt
Zoom
Cut
Pace
Performance
Diegetic
Non Diegetic
Mise en scene (Setting, costume, figure expression, props)
New Headway Intermediate - Unit 11 tell me about it .. ..
New Headway Intermediate Unit 11 tell me about it
New Headway Intermediate UNIDAD 11 Tell me about it !.
TEMAS: Indirect questions, Question tags, The body, Informal English.
Dimensional Fund Advisors' powerful slides on the small cap and value effect detail how small stocks and value stocks enhance portfolio returns and explain portfolio performance.
Concepts that inform a market-based investment approach, grouped in four categories: Market Equilibrium, Diversification, Dimensions of Returns, and Investor Discipline.
Structured Investing In An Unstructured WorldRobert Davis
Structured Investing is based on 80+ years of financial market data, Nobel Prize-winning economic research, and in-depth studies of investor psychology and behavior.
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.
Similar to Pursuing_a_Better_Investment_Experience_Slides (20)
Why Global Diversification Matters By Anthony Davidow Ap.docx
Pursuing_a_Better_Investment_Experience_Slides
1. Pursuing a Better
Investment Experience
Last updated: July 2016
Provided by:
Eddy Mejlholm, CFP, FMA, CIM, FCSI
Wealth Advisor with RBC Dominion Securities
eddy.mejlholm@rbc.com
2. 1. Embrace Market Pricing
2
The market is an effective,
information-processing machine.
Millions of participants buy
and sell securities in the world
markets every day, and the
real-time information they bring
helps set prices.
In US dollars. Global electronic order book (largest 60 exchanges). Source: World Federation of Exchanges.
World Equity Trading in 2015
Number of Trades Dollar Volume
Daily
Average
98.6
million
$447.3
billion
5. In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
US Small Cap Index is the CRSP 6-10 Index; US Large Cap Index is the S&P 500 Index; Long-Term Government Bonds Index is 20-Year US Government Bonds; Treasury Bills are One-Month US Treasury bills;
US Inflation is the Consumer Price Index. CRSP data is provided by the Center for Research in Security Prices, University of Chicago. The S&P data is provided by Standard & Poor's Index Services Group.
Bonds, T-bills, and inflation data provided by Morningstar. Past performance is no guarantee of future results.
4. Let Markets Work for You
The financial markets
have rewarded long-term
investors. People expect
a positive return on the capital
they supply, and historically, the
equity and bond markets have
provided growth of wealth that
has more than offset inflation.
5
Growth of a US Dollar, 1926-2015
(Compounded monthly)
$0
$1
$10
$100
$1,000
$10,000
$100,000
1926 1936 1946 1956 1966 1976 1986 1996 2006
$16,743
US Small Cap Index
$5,386
US Large Cap Index
$132 Long-Term
Govt. Bonds Index
$21 Treasury Bills
$13 US Inflation (CPI)
2015
6. 5. Consider the Drivers of Returns
6
Academic research has
identified these equity and
fixed income dimensions,
which point to differences
in expected returns.
These dimensions are
pervasive, persistent, and
robust and can be pursued
in cost-effective portfolios.
Diversification does not eliminate the risk of market loss. Relative price is measured by the price-to-book ratio; value stocks are those with lower price-to-book ratios.
Profitability is a measure of current profitability, based on information from individual companies’ income statements.
Dimensions of Expected Returns
Market
Equity premium—stocks vs. bonds
Company Size
Small cap premium—small vs. large companies
Relative Price
Value premium—value vs. growth companies
Profitability
Profitability premium—high vs. low profitability companies
Term
Term premium—longer vs. shorter maturity bonds
Credit
Credit premium—lower vs. higher credit quality bonds
EQUITIESFIXEDINCOME
9. 8. Manage Your Emotions
9
Many people struggle to
separate their emotions from
investing. Markets go up and
down. Reacting to current
market conditions may lead to
making poor investment
decisions at the worst times.
For illustrative purposes only.
Reactive Investing in a Market Cycle
NervousnessOptimism
Fear
Elation
HIGHER PRICES
LOWER PRICES
Optimism
10. For illustrative purposes only.
9. Don’t Confuse Entertainment with Advice
Daily market news and
commentary can challenge
your investment discipline.
Some messages stir anxiety
about the future while others
tempt you to chase the latest
investment fad.
When tested, consider the
source and maintain a long-
term perspective.
10
11. 10. Focus on What You Can Control
11
A financial advisor can create a
plan tailored to your personal
financial needs while helping you
focus on actions that add value.
This can lead to a better
investment experience.
Diversification does not eliminate the risk of market loss. There is no guarantee investment strategies will be successful. For illustrative purposes only.
Creating an
investment plan to fit
your needs and risk tolerance
Structuring a portfolio along
dimensions of expected returns
Diversifying broadly
Reducing expenses and turnover
Minimizing taxes