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Exercising Some Humility
“To err is human” as Alexander Pope once wrote. No one is perfect, and we all make mistakes. It’s in our nature. For individuals that are more hardy and honest, difficult experiences can provide some...
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Your Money & Your Brain
Wall Street Journal columnist Jason Zweig has written on just about every topic imaginable when it comes to the world of personal finance. His book Your Money & Your Brain covers a gamut of...
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Gold And Asset Allocation
My previous attempt at owning gold (through the SPDR Gold Trust) didn’t work out so well. At the time my actions were largely based on emotion and I didn’t take the time to consider the advantages or...
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Against The Gods
Peter Bernstein’s masterpiece Against The Gods is without a doubt one of the great works in business literature. It’s an insightful and illuminating investigation into the meaning of risk and the ideas...
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“Safe” Assets
Many investors hold bonds or bond funds as part of a diversified portfolio. Bonds can be used to reduce portfolio volatility while providing a reliable stream of income. Given the current economic...
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Speculation, Rebalancing And Overbalancing
Asset allocation tends to be a rather staid option among investing strategies. Determine an allocation plan, contribute and rebalance regularly, and the job is pretty much finished. Achieving wealth...
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Defining Risk
What is risk? The search for an answer to this question has puzzled philosophers, mathematicians and thinkers for centuries. The question seems so simple but attempting to answer it proves to be quite...
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When Genius Failed
Roger Lowenstein has perhaps captured the most complete and definitive story of hedge fund Long-Term Capital Management. The firm started out as a small group of well pedigreed and incredibly...
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Miner Mania!
In the mid-nineteenth century the allure of finding gold out west and striking it rich appealed to a certain adventurous type. Thousands of optimists ended up making the exodus to California. A few got...
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The Rule of 72 And Skew
I’m a big fan of simple things. The rule of 72, a quick calculation that computes how long it will take to double an investment, is probably as simple as they come. The formulation is fairly...
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Pound Foolish
Helaine Olen’s book Pound Foolish should be required reading for everyone interested in personal finance and money management. The personal finance industry that most of us are familiar with markets...
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Rebalancing With Shannon’s Demon
Claude Shannon was a prolific individual when it came to mathematics and science. The former Bell Labs researcher and MIT professor helped develop a field of study known as information theory and...
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Markowitz’s Portfolio Selection
Harry Markowitz is often referred to as the father of Modern Portfolio Theory–a collection of mathematical models that quantify the behavior of assets and portfolios of assets. Harry’s work...
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Defining Risk Part 2
For part 1 see Defining Risk Just over a month ago I wrote on the subject of risk with an attempt to define what risk really is (at least for me). I ended the article by defining that risk was anything...
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Global Asset Allocation
If you’re interested in asset allocation strategies Meb Faber’s book Global Asset Allocation is worth a read. Generally speaking it’s short and easy to understand. The first few chapters deal with the...
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The Mythical Rebalancing Bonus-Part 1
The rebalancing exercise that I performed with Shannon’s Demon implied that a premium may be obtained by rebalancing a portfolio of uncorrelated assets. These assets featured highly hypothetical...
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The Mythical Rebalancing Bonus-Part 2
In Part 1 I showed that as investment time increased there was, at least historically, a smaller probability of realizing a rebalancing bonus in 60/40 stock/bond portfolios. There was a lot that I left...
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The Black Swan
I consider myself a child of the Global Financial Crisis (a.k.a. The Great Recession). As I wrote about in my introduction I started my career in early 2008, just as the US housing market was unwinding...
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The Factors Of Returns
The idea of exposing an investment portfolio to various “factors” (i.e. small company stocks, value stocks, etc.) as a means to improve returns has been around for decades. The value premium traces its...
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Linchpin
Over the past few years I’ve found myself having a recurring conversation with friends, colleagues and family members. Despite indications that the economy is healthy and moving along, it sure doesn’t...
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