Now that the capital markets have once again begun exhibiting a level of volatility not seen for a number of years, it’s appropriate to revisit the relationship between risk and return. Wesley Gray, CEO of Alpha Architect, a Pennsylvania investment advisory firm, has come up with an interesting thought experiment that brings this relationship into…
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One of Benjamin Franklin’s well-known aphorisms is, “An ounce of prevention is worth a pound of cure.” Could this apply to the world of investing as well?  Yes, as it turns out. I’ve written before on the topic of volatility drag (see https://www.cognizantwealth.com/2012/05/15/volatility-is-a-drag/) which causes an investment whose return is constantly fluctuating between positive and…
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Amongst all the various cognitive biases that cause human beings to think and act irrationally, one of the more insidious ones is known as confirmation bias. Simply put, it means we tend to favor information that supports previously existing beliefs, and tend to reject anything that does not.  How much of a problem is confirmation…
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Happy New Year! Now that the dust has settled on 2015, it’s time to enjoy the flood of predictions coming from well-known (and not so well-known) experts on stock market performance for 2016.  I did a quick scan and came up with the following: Julian Emanuel, a strategist at UBS, expects the S&P 500 to…
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In a recent 2016 investment outlook paper, Joseph Davis, Vanguard’s chief economist, estimated annual global equity growth over the next five to ten years to be in the 5%-8% range, significantly below the 10% average from 1926-2014. He based this expectation to a large extent on lower U.S. and international GDP real growth rates.  While…
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