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June 1, 2015

Stunning Odds Doom Your Returns

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Few investors understand the stunning odds that are likely dooming their returns. The system is rigged against investors and in favor of those who “manage” their money. Mutual fund families, brokers and insurance companies are the big winners in this...

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Anomalies Can Mean Alpha

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Since the development of the capital asset pricing model (CAPM) about 50 years ago, academic researchers have documented several hundred “anomalies” that generate a significant positive alpha. There are now so many that professor John Cochrane referred to them as...

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Scale Works Against Active Skill

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An overwhelming body of evidence clearly demonstrates that past performance isn’t prologue, which presents a problem for investors who believe active management is the winning strategy. Without the ability to rely on past performance as a predictor, there is really...

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Diversify Globally To Limit Risk

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Diversification is often referred to as the only “free lunch” in investing because, when done properly, it allows investors to improve risk-adjusted returns. This principle applies not just to diversification across U.S. stocks, but to investing globally. The choice to...

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Active Arguments Disproved

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A reader asked me to comment on a recent Forbes article titled “Active Versus Passive Management: Which Is Better?” The author, contributor Peter Andersen, asks this question while observing that, in 2014, the vast majority of active fund managers underperformed...

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