Mutual Funds

Can the Size and Value Premiums Be Captured?

2015-11-13T04:20:19+00:00 Sep 2013|Mutual Funds, Small Stocks|

The debate about whether the size and value premiums have existed on paper was settled many years ago. The long-term historical data clearly shows robust size and value premiums. The average annual U.S. size and value premiums have been 3.6 and 4.8 percent, respectively, from 1927-2012. What has been more hotly debated, however, is whether these premiums could actually be captured in the real world net of transactions costs and fund expense ratios. In my opinion, even this debate is a bit silly at this point. If you examine the returns of intelligently built, low-cost mutual funds that have been designed specifically to capture these premiums, it’s clear they’ve been successful.

How to Make Your Own High-Yield Corporate Bond Fund

2016-01-12T14:50:45+00:00 Jun 2013|Alternative Investments, Asset Allocation, Equities, Fixed Income, Mutual Funds|

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.