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A Lesson In Investing Simplicity

February 10, 2017

This article highlights how even the top performing university endowment funds, with access to the best money managers in the world, have failed to keep pace with a simple 60% stock / 40% bond index fund portfolio over the past 10 years. While the endowment model may still be appropriate for certain tax-exempt institutions, individual investors attempting to follow this complex, institutional approach are often saddled with sizable tax bills, high accounting fees, reduced liquidity, and additional access fees.

Link | Why The Bogle Model Beats The Yale Model (Marketwatch)

Buffett Advocates Index Funds

May 25, 2016

As this Wall Street Journal article notes, Warren Buffett once again took time at the Berkshire Hathaway annual meeting to recommend individual investors, even the wealthiest, buy index funds as opposed to actively-managed mutual funds and hedge funds. Buffett’s argument is simple, and backed by reams of historical data showing active mutual funds and hedge funds consistently fail to overcome the hurdle of higher fees.

Link | Warren Buffett’s Epic Rant Against Wall Street (Wall St. Journal)

Befriending the Bear

January 27, 2016

This Wall Street Journal article aptly describes the correlation between stock market risk and higher expected returns. In order to consistently capture the attractive long-term returns of the stock market, investors must be willing to accept the inevitable volatility and “befriend the bear.” The article also highlights other core tenets of investing such as the importance of setting and sticking to a customized asset allocation plan.

Link | Befriending the Bear (Wall St. Journal)

Best Books for Investors

December 3, 2014

The Wall Street Journal’s Jason Zweig is one of our favorite columnists and he’s put together a short list of “great books you must read.” Whether you are holiday shopping or want to pick something up for yourself, here’s a timeless list of investing books vetted by one of the best financial writers we know.

Link | Best Books for Investors: A Short Shelf (Wall St. Journal)

The Decline of Fund Managers

August 29, 2014

This Wall Street Journal article discusses how and why the investment industry is transitioning from active management to index-oriented portfolios built around the client’s situation. While of course we have a strong bias toward the low-cost, index-oriented investment approach, conviction from a no-nonsense industry leader such as Charles Ellis is certainly nice confirmation.

Link | The Decline of Fund Managers (Wall St. Journal)

A Different Dimension

January 15, 2014

Trellis Wealth Advisors builds portfolios using low-cost, index-oriented funds from Vanguard and Dimensional Fund Advisors. While many investors are familiar with Vanguard, this Barron’s cover article introduces Dimensional Fund Advisors and its unique investment approach based on solid financial theory and empirical evidence (as opposed to speculation, market forecasts and manager skill). Decades of financial research have identified dimensions of higher expected returns in the global capital markets and Dimensional Fund Advisors has translated this research into sensible, low-cost investment solutions that allow investors to capture these dimensions within diversified portfolios.

Link | A Different Dimension (Barron’s Magazine)

Hard Landing For Endowments

October 18, 2012

This NY Times article explains how even the revered university endowments, with access to the best hedge fund and private equity managers globally, have failed to keep up with a 60/40 portfolio. While the endowment model may be appropriate for tax-exempt institutions with perpetual investment horizons and fundraising capabilities, individual investors often pay an additional layer of fees, compromise precious liquidity, and suffer significant tax bills for the opportunity to emulate this “institutional” approach.

Link | A Hard Landing For University Endowments (NYTimes.com)

Active Funds Underperform in 2011

April 12, 2012

This report released by Standard & Poor’s showed that 84% of active US managers underperformed their respective S&P benchmark indices in 2011. Not surprisingly, S&P also summarizes that the only consistent data point observed over a five-year horizon is that a majority of active equity and bond managers in most categories lag their comparable benchmark indices. The S&P report cites other data points further indicting active management such as survivorship bias, style drift among managers, and underperformance during bear markets (periods which should favor active management given their ability to move to cash, or seek more defensive positions).

Link | S&P Indices Versus Active Funds (StandardandPoors.com)

Rich Managers, Poor Clients

January 25, 2012

This concise article in The Economist lifts the veil on hedge fund returns – specifically who actually reaps the profits and why even the industry’s lackluster returns since 1998 are misleadingly high. A worthwhile read that cites the eye-opening statistics compiled by a former hedge fund insider at JP Morgan.

Link | A Devastating Analysis of Hedge-Fund Returns (Economist.com)

Why You Should Rebalance

May 27, 2011

This article cites the fundamental premise behind rebalancing – to ensure your portfolio is not taking on more or less risk than you have determined is necessary to reach your goals. It also highlights the important variables to consider when rebalancing – timing, transaction costs, tax implications, and discipline.

Link | Why You Should Rebalance (CBSMoneyWatch.com)