27 June 2016

What You Need to Know About Brexit




Britain is leaving the EU. Now what? Jared Kizer on what the Brexit vote means for the markets and your portfolio.

Continue Reading

14 January 2016

What to Make of 10-Year Small-Cap and Value Results




Ken French’s recently updated global factor data shows the global size and value premiums were basically flat for the past 10 years (the value premium was actually about –1 percent per year over this span). This long-term historical result has surprised many people and naturally led some to ask whether these premiums can be expected in the future. Figure 1 graphs the one-, three-, five-, 10-, 15- and 20-year average size and value premiums using the global data set.

Continue Reading

18 October 2015

An Analytical Evaluation of Rising Glidepath Claims




Last year, a piece by Michael Kitces and Wade Pfau made the claim that mechanically increasing the equity allocation during retirement — which they term a “rising glidepath” — could reduce the likelihood that a retiree outlives his or her assets and could decrease the magnitude of shortfall when capital market returns disappoint. Specifically, the paper stated:

“We find, surprisingly, that rising equity glidepaths in retirement … have the potential to actually reduce both the probability of failure and the magnitude of failure for client portfolios.”

Continue Reading

30 September 2014

Additional Thoughts on the Rising Glidepath Approach




6 March 2014

Smart Beta Can Be Smart But Is Not New




I held off writing about smart beta strategies as long as I could. The world, after all, is awash in such pieces. I couldn’t ignore it any longer, though, because virtually every piece I’ve read that’s critical of smart beta misses one fundamental point: The term “smart beta” may be new (and has certainly been effective from a marketing perspective) but the underlying strategies themselves are not.

Continue Reading

12 September 2013

Is DFA’s New Research Flawed?




Folks have been lighting up my inbox with questions and comments about an Advisor Perspectives pieceby Michael Edesess (link included for the three of you who may not have seen the piece … you three may also not be aware that Miley Cyrus appeared on the MTV Video Music Awards … link not included).

The article is critical of DFA’s recent work on profitability. I’ll focus most of my comments on the contents of Edesess’s section entitled “How the DFA argument is flawed.”

Continue Reading

20 June 2013

How to Make Your Own Investment-Grade Corporate Bond Fund




Last week, I outlined how to construct a portfolio of stocks and high-quality bonds to replicate the returns of high-yield corporate bonds. This week I’m tackling investment-grade corporate bonds.The same basic logic as last week holds: There’s not much unique about investment-grade corporate bonds that you can’t achieve with a diversified portfolio of stocks and high-quality bonds. The only difference is you don’t need as much in stocks to replicate the returns of investment-grade corporate bonds as you do with high-yield corporate bonds. This is because high-yield corporate bonds are more similar to stocks because they both have substantial exposure to default risk. Investment-grade corporate bonds have less default risk and therefore aren’t as similar to stocks.

Continue Reading

13 June 2013

How to Make Your Own High-Yield Corporate Bond Fund




With interest rates at low levels for a number of years now, many investors have moved some portion of their high-quality bond portfolios to higher-yielding investments like high-yield corporate bonds. I’ve long argued that there’s not much these strategies add relative to a traditional stock fund and high-quality bond strategy. Further, the traditional stock fund and high-quality bond allocation strategy tends to have lower costs and be more tax efficient. This is a bit of a qualitative argument though, and I wanted to illustrate the point quantitatively.

Continue Reading