Advisors will learn how using factors and alternative investments that have premiums that are unique and have evidence of persistence, pervasiveness, robustness, implementability, and intuitive risk- or behavioral-based explanations for why we should expect the premiums to persist in the future can lead to the building of more efficient portfolio that also reduce tail risks. You will learn which factors from the over 600 in the literature should be considered and which alternatives out of the many available should be used and why.
Economic theory posits that investors require high expected returns when cyclical consumption is low in economic contractions and low expected returns when cyclical consumption is high in economic expansions. New research is consistent with that theory.
There isn’t convincing evidence that a style-timing strategy, based on business cycles, can be expected to be profitable going forward.
There are logical explanations for why the size premium may have shrunk. But there also remain simple, intuitive, risk-based explanations for why the premium should persist.
Diminished cognitive skills, often the result of Alzheimer’s disease, are the greatest threat to the financial stability of your older clients, particularly those over age 65. A new book directed to advisors provides the tools to identify and overcome those threats.
In biblical tradition, the four horsemen of the apocalypse are a quartet of immensely powerful entities personifying the four prime concepts – war, famine, pestilence and death – that drive the apocalypse. For today’s investors, the equivalent is historically high equity valuations, historically low bond yields, increasing longevity and, as a result, the increasing need for what can be very expensive long-term care.
At least for tax-advantaged investors, dividends are irrelevant: They are neither good nor bad in terms of forward-looking return expectations. Therefore, while there is no reason to exclude dividend-paying stocks, focusing solely on them leads to less diversified (less efficient) portfolios.
REITs are vulnerable to an increase in interest rates or an economic contraction. If you have been thinking of increasing your allocation to REITs to generate more cash flow, this new research – and current valuations – should serve as a cautionary warning.
I often hear criticisms about the use of bond ladders. Whenever the criticism comes from professional advisors, however, I’ve noticed it generally involves firms that use only bond mutual funds or ETFs instead of individual, tailored bond portfolios, whether in the form of a bond ladder or not. Unfortunately, much – if not all – of this criticism is based on falsehoods and the conflicts that can arise when advisors employ only mutual funds and ETFs.
What explains the fact that municipal bond yields are only slightly lower than equivalent Treasury bonds, giving muni investors a much higher taxable-equivalent yield? The answer lies in their liquidity, which is good news, especially for buy-and-hold investors of individual bonds.