My blog provides valuable insights into Nobel Prize-winning financial strategies for investors. By utilizing decades of worldwide peer-reviewed capital markets research and analysis, I demonstrate how to build better investment portfolios with lower risks. I also examine common financial media misinformation and how investors can make better financial decisions.
Trillions of dollars have poured into environmental, social, and governance funds in recent years. In 2021, the figure grew $8 billion a day. Bloomberg Intelligence projects more than one-third of all globally managed assets could carry explicit ESG labels by 2025, amounting to more than $50 trillion. Yet for a financial phenomenon this pervasive, there is astonishingly little evidence of its tangible benefit.
The implicit promise of ESG investing is that you can do well and do good at the same time. Investors presume they can make a market return while advancing causes such as lowering carbon emissions and income inequality. But multiple studies find ESG strategies are doing little of either. Bradford Cornell of the University of California, Los Angeles and Aswath Damodaran of New York University reviewed shareholder value created by firms with high and low ESG ratings - scores provided by professional rating agencies. Their conclusion: "telling form that being socially responsible will deliver higher growth profits and value is false advertising.
Markets gifted us with another burst of volatility and headlines are looking apocalyptic again. Some folks might think it's time to bail on markets for the summer, but I'll tell you why that thinking is a mistake.
First, let's peel back some layers to explore what's driving markets. (Want to discuss any concerns directly? Just click this link and let me know.) The latest selloff was largely driven by concerns about how the pace of Federal Reserve interest rate hikes could affect economic growth. The Fed's "hawkish" policy of rapidly rising interest rates to bring down inflation seems likely to take a chunk out of economic growth.
Is a recession or bear market on the way? Those are risks we are prepared for.
As the U.S. economy continues to be in a highly inflationary period, it may be helpful for advisors to study up on how money supply is measured, recent circulation trends and performance of the U.S. dollar. here are the latest developments in world currencies and money supply.
On May 4, the US Federal Reserve Increased the target federal funds rate by 50 basis points as part of what the central bank said will be a series of rate increases to combat soaring inflation in the US. Some investors may worry that rising interest rates will decrease equity valuations and therefore lead to relatively poor equity market performance. However, history offers good news: Equity returns in the US have been positive on average following hikes in the fed funds rate.
This article is written by Dave Goetsch who is the Executive Producer of the CBS comedy "United States of AI." He previously served as Executive Producer of "The Big Bang Theory" and as a writer on "3rd Rock from the Sun." Goetsch is a Dimensional consultant.
I’ve been working in sitcom writing rooms for the past 25 years, and one of the most discussed, and least understood, topics is investing. To be in one of those rooms means that you have already beaten the odds. In success, the financial benefits can be fast and huge (Google “writer” plus “nine-figure deal”), but in failure, the financial misfortune can come even faster and be even more extreme.
So what do you do? How do you plan when there’s no way to know which show you’ll be working on one, three, or five years from now? Or whether you’ll be working at all? Thanks to my exposure to a better way of investing, I have an incredible advantage over almost every one of my colleagues.
This report features a market review that discusses global stock trends, U.S. stock returns, and U.S. Treasury yields. There's also an article illustrating the magnitude and speed of the economic recovery since the onset of COVID-19 and the subsequent recession, as well as an academic article: Financial Decision-Making in Married Couples
Don't put all your eggs in one basket. We've all probably heard the old idiom warning against the danger of committing all your resources into one area. If you wouldn't make a concentrated investment on one single stock, why would you limit your investment opportunities to just one country?
Should I be concerned about the recent underperformance of small and value companies?
When you go through a time period like we have gone through recently where value has underperformed growth, and small caps have underperformed large caps, it's natural for people to want to question if they should change their asset allocation. However, getting past the recency bias and understanding that we want to make investment decisions based on probabilities rather than possibilities may lead to a better investment experience.
Taking a step back, we know that both the value and size premiums are rooted in sound economic theory. All else being equal, companies with lower relative prices (value stocks) and lower market capitalization (small cap stocks) should have higher expected returns. In addition to being economically sensible, these premiums are supported by a preponderance of evidence spanning nearly a century in the US and more than five decades in non-US markets.
While we wake up every day and expect positive value and size premiums, we understand there is volatility associated with pursuing these premiums. Exhibit 1 shows the percentage of 1-, 5-, 10-, 15-, and 20-Year periods with negative premiums in the US equity markets through December 31, 2019. As illustrated below, there will be times when we experience negative premiums, but as an investor, you need to determine if you want to make a decision that has a high probability or low probability of success.