People tend to dwell on the obstacles (headwinds) they face and discount the advantages (tailwinds) they experience in their lives.
This bias may cause overreactions to market downturns (headwinds) while underestimating steady gains (tailwinds), disrupting long-term financial plans.
Appreciating the tailwinds in our lives can improve well-being and help maintain a balanced perspective, especially in financial decision-making.
Strange times are afoot in the investing world. Your portfolio probably isn’t ready for them.
The U.S. stock market is the big dog of the global stock market, and recently it has taken on Clifford proportions at two-thirds of global market value. That outweighs America’s one-quarter of the world’s economy and 4% of the world’s population, but the U.S. tail has usually wagged the global dog.
Recently, though, that relationship has broken down. It could signal an investing upheaval, and very poor returns for big U.S. stocks in coming years. Analysts at DataTrek Research note that the usual correlation between the main U.S. benchmark, the S&P 500, and MSCI EAFE, an index of non-U.S. developed stocks, has historically been a very high 0.83. Over the past 100 days, it has been 0.54.
The debate between active and passive money management has been ongoing for decades, with passive investing gaining increasing support due to its superior long-term performance relative to traditional active stock picking. Data over the past two decades — likely even longer when adjusting for survivorship bias — has consistently shown that approximately 95% of active managers (of all domestic U.S. funds) underperform their benchmarks. The sheer scale of inefficiency is striking: In 2020 alone, American investors paid an estimated $190 billion in fees to active managers, largely subsidizing a system that fails to deliver (95% of the time!) consistent excess returns.
President Donald Trump’s use of tariffs as a policy tool makes weekly headlines. However, because the U.S. has promoted free trade policies for many years, this topic may be relatively new for some people and sometimes misunderstood.
To help you monitor new developments and understand how they might affect you and your investments, we’ve created a basic guide on tariffs. It explains their purpose, implications and potential impacts.
The growing market share of passive investments has been a continuing theme in the fund industry over the past few decades. Passive funds are often thought of as mutual funds or exchange-traded funds (ETFs) that track a periodically rebalanced, market-capitalization-weighted index.
In August 1996, 20 years after the launch of the first publicly available index fund, passive funds represented only 6% of U.S.-domiciled equity mutual fund and ETF assets. Active, non-index tracking funds held 94%. As of the end of May 2024, passive mutual funds and ETF assets have grown to nearly 60% of the equity fund market.
Figures such as these, along with the common perception that all passive investors are buying and holding the market and thereby no longer actively trading in stocks, have brought about questions about the potential impact passive investing may have on market prices. Periods when a subset of companies rise rapidly in price and valuations, such as the Magnificent 7 stocks of late, may also contribute to investor curiosity. Some claim that perhaps more money flowing into index funds that hold these companies is the driving force for the dramatic price increases in those few mega-cap companies with very high prices.
