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Best Blogs of the Week

Posted by Anu Heda on Aug 31, 2011, in Best Blogs of the Week

With Hurricane Irene dominating the news (rightfully so) and many people returning from a final summer vacation, we thought to post mid-week.   Over the last nine days, the blogosphere has been dominated by volatility.  With recent market swings, August can be a good time to reintroduce that topic.  Here are three posts that specifically lend a hand to the financial advisor with jittery clients.

  1. Vanguard – this post shares the value of re-balancing infrequently.
  2. Russell – this post reminds investors to consider long-term perspective and the importance of a diversified portfolio.
  3. American Century – and in case anyone is looking for data on the volatility, this post does a nice recap.

Have a fun Labor Day; we’ll return mid-week with “Best Blogs of the Week.”

Best Blogs of the Week

Posted by Anu Heda on Aug 22, 2011, in Best Blogs of the Week , tagged with ,

These three posts do an excellent job describing relevant situations and issues, post-Debt crisis (has anyone given the August 1st situation a good “-gate” name?).

  1. Russell – This post is humorous and depressing.  The author provides tangible examples of how US debt’s largesse.
  2. Russell – My favorite post of the week (a combination of Excel simulations and good graphics results in information I enjoy), the author provides a clear analysis of high expected risk versus low expected risk.  This analysis arms an FA with straight-forward statistical analysis.
  3. BlackRock – This post relates changes in gold prices to valuations in (gold) mining and consuming countries.  Simple enough; but I hadn’t considered this much and can imagine the value in this line of thinking for a FA discussing geographic diversification and explicit risks.

David Swensen and the Reality of Past Performance

Posted by Mike McLaughlin on Aug 15, 2011, in Thoughts , tagged with , , , , ,

If you read our blog, by now you’ve probably also read David Swensen’s op-ed from the Saturday New York Times. There’s a lot in there worthy of discussion, but one paragraph in particular got a strong reaction from me:

Mutual fund companies, retail brokers and financial advisers aggressively market funds awarded four stars and five stars by Morningstar … But the rating system merely identifies funds that performed well in the past; it provides no help in finding future winners. Nevertheless, investors respond to industry come-ons and load up on the most “stellar” offerings.

Let’s all say it together: past performance is not predictive of future results. True in investing? Yes. In life? No.

The reason David Swensen gets to write an op-ed for the New York Times and lead the Yale endowment is because of what he’s done in the past. Looking at the track record of anything is the most intuitive evaluation barometer we have. Ignoring it is neither natural nor logical.

This doesn’t mean the issue Swensen raises – investors unsuccessfully chasing performance – isn’t real. I just think he’s angrily, unfairly, and incorrectly casting blanket blame on mutual fund marketers and financial advisors, who generally believe in what they’re doing and try to do right by their customers and themselves.

The real enemy here for Swensen is human nature. It’s in our nature to be emotional and overconfident, and compensating for these realities will require a lot more than broad-stroke, ham-handed criticisms of an entire industry.

Best Blogs of the Week

Posted by Anu Heda on Aug 15, 2011, in Best Blogs of the Week , tagged with , ,

What a week?  To me, it seems like more than 7 days ago when the global markets reacted to Standard & Poor’s downgrade.  With that historic event, there was significant blogging.  That fact is significant – asset managers are able to ramp up volume and timely blog posts related to market conditions.  Even 1 year ago, that probably was not possible.

I have four excellent posts this week, with Vanguard taking two spots.  All relate to the downgrade and subsequent market volatility.

  1. Vanguard – This post provides a bit of long-term perspective (as expected from Vanguard).
  2. Vanguard – The post re-introduces shortfall risk at just the right time to consider that before listening to media pundits panic.
  3. BlackRock – A nice post, easy FA-to-client sharing, that discusses the week’s volatility and some historical perspective.
  4. Wells Fargo – Single best title of the week is “No, this is not 2008 all over again.”

Marketing Volatility – Clarify What You Mean

Posted by Mike McLaughlin on Aug 10, 2011, in Thoughts , tagged with , , ,

A headline from the closing bell today brings out another tactical but important issue investment firms will face in talking about volatility.

The headline prominently cites the VIX (Volatility Index), which has gotten an increasing amount of mainstream attention over the last few years as the designated “fear gauge”. This makes incorporating volatility into marketing tricky, because in today’s environment volatility has multiple meanings.

There are traditional, backward-looking, vehicle-specific measures like standard/downside deviation. And there are forward-looking, blended measures like the VIX. Any investment manager wanting to incorporate volatility into its messaging may have to start by clarifying exactly what they’re talking about.