Intelligent Investing

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Investing/ Markets

Academics Converting Alpha Into Beta

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Academics Converting Alpha Into Beta

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On today’s Intelligent Money Minute, we’ll interview Larry Swedroe on how academics converting alpha into beta make outperformance difficult. Prior to 1992, only active managers had exposure to market beating stocks. In this episode, Larry details the history of alpha and outperformance and what changed for passive investors. He refers to a white paper titled, The Cross-Section of Expected Stock Returns written by Fama and French. This paper altered the landscape of investing because of it’s 3 factor model. Now passive investors have the ability to gain exposure to the same markets in a much more tax efficient manner. 

At Intelligent Investing we believe that Asset Allocation, or the long-term mix of stocks, bonds, and cash is the primary determinant of the variation of returns a client can expect. As a result, we focus on creating an appropriate blend that has a dual focus- maximizing returns and minimizing risk. To learn more about our asset allocation and our other wealth management practices, visit to investedwithyou.com/philosophy.

We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.

Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

Since joining the Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing.

In his role as chief research officer and as a member of the firm’s Investment Policy Committee and Board of Directors, Larry regularly reviews the findings published in dozens of peer-reviewed financial journals, evaluates the outcomes and uses the result to inform the firm’s formal investment strategy recommendations.

Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Advisor Perspectives and ETF.com.

Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp.

Larry holds an MBA in finance and investment from NYU, and a bachelor’s degree in finance from Baruch College.

Time In Markets Is Important, Not Timing Markets

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Fear is Back

We have recently seen an uptick in volatility and fear. As you can see from this Fear & Greed Index, which represents what emotion is driving the market now, there has been an increase in fear.

Fear & Greed

Timing Markets

As you can see from the chart below from J.P. Morgan, time in the markets is what matters. On the left, you will see what most investors focus on…the short term. Going back to 1950, in any given 1 year period, the S&P 500 was anywhere between -39% and +47%. That is quite a volatile swing. It’s no wonder that investors typically jump from the ship too early, and lock in permanent losses. This misbehaving is compounded by investors waiting on the sidelines in cash, while markets rapidly recover. This misbehaving means they buy high, sell low, and repeat.

 

Time In Markets Is Important

An intelligent investor will reflect on the right-hand side of the chart and realize that although in the short run, anything can happen, a disciplined long-term approach will smooth out the ups-and-downs, resulting in a potential for a greater chance to succeed. The problem is that the constant 24/7 media doesn’t help investors with their constant focus on fear, because let’s face it—fear sells. Even in the above example, having a hypothetical 50/50 portfolio of stocks and bonds over a 5-year rolling period didn’t produce a negative return. Will this chart repeat in the future? Probably not exactly, but having a long-term approach and diversified portfolio may give you a better chance of meeting your long-term goals than having a short-term mindset.

Time in markets is important... not timing markets. Share on X

Intelligent Investing is dedicated to improving investor behavior by being a behavioral coach through the market cycle rollercoaster that we get by participating in markets. If we can help you stick to your financial plan, please let us know. We work predominantly with high net worth individuals and institutions who want to become Intelligent Investors.

Dangers of Backtesting Performance & Managers

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Rick Ferri Survivorship Bias

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On today’s Intelligent Money Minute, we’ll interview Rick Ferri on surviviorship bias and the dangers of backtesting performance and managers. During this episode, Rick defines survivorship bias and how it can skew one’s investing strategy. He explains how dataset information can be inaccurate due to the exclusion of closed funds. In conclusion, Rick highlights the difficulty in outperforming the market.

At Intelligent Investing, you are the center of our wealth management philosophy. For that reason, we want to get to know you, your family relationships, your dreams, and goals, and not just on a surface-level conversation. Read more about our wealth management philosophy.

Check out our previous podcasts with Rick on The Power of Passive Investing and Remembering the Legacy of Jack Bogle. We’ll be interviewing Rick on several podcasts regarding index investing, behavioral finance, and practical tips for retirees, so be sure to subscribe to our Intelligent Money Minute podcasts.

Rick Ferri is a fellow CFA Charterholder, Marine veteran, author, and owner of Ferri Investment Solutions. He continues to write books and articles, provide educational webinars, and teach financial lectures.

Rick Ferri Bio

Rick Ferri earned a B.S. in Business Administration and an M.S. in Finance. He also holds a Chartered Financial Analyst (CFA) charter through the CFA Institute. After college, Rick served as a U.S. Marine Corps officer and fighter pilot for 20 years of active duty and reserve service.

Rick’s investment career spans three decades and offers a history of empowering people to achieve their goals. He landed in the brokerage industry in 1989 where he learned the wrong way to invest. As a result of 10 frustrating years, Rick founded one of the country’s first low-fee investment advisory firms. Rick’s firm grew to a sizable business over the next two decades due to the explosion of interest in low-fee investing. This growth provided good-paying jobs to dozens of people and allowed Rick to take on business partners with whom he generously shared his equity. Rick left the firm a few years ago and is no longer an owner.  

Ferri Investment Solutions is Rick’s new firm. This modern concept provides even greater value to investors by “unbundling” adviser services whereby clients pay only for the time it takes to assist them. In addition, Rick’s industry consulting firm helps other advisers build their investment practices, and he has launched Core-4 Portfolios to provide simple model portfolios for use by a wide variety of investors. 

How’s It Going To End?

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How's It Going to End?

The Truman Show is a 1998 science fiction film featuring Jim Carrey as Truman Burbank. Truman, the unsuspecting star of The Truman Show, a reality television program broadcast live around the clock worldwide, spends his entire life in the fictional seaside town of Seahaven Island. This giant set equipped with state-of-the-art technology can simulate day/night, weather conditions, and has thousands of cameras to watch him. During his college years, Truman was supposed to fall in love with and marry co-student and actress Meryl. Instead, he fell for Sylvia, an “extra.” Sylvia warns Truman his “reality” is fake. Outside of the show, Sylvia has become part of a “Free Truman” campaign that demands the end of the show and Truman’s freedom. Sylvia helps Truman realize he is a pawn within a greedy corporation and wears a red sweater with a pin that says, “How’s it going to end?”

The question on Sylvia’s button may be the same question on your mind when it comes to the market. How is it going to end? When is it going to end? 

What is a Bull Market?

First, let’s define a bull market. A bull market is a market pattern that occurs when prices keep rising up 20% from a previous drop of 20%. A bull market can refer to the securities market (like stocks and bonds), but can also refer to other markets like housing.

How Will This Bull Market End?

The U.S. economic expansion entered a record 11th year, while the bull market in equities is a few months older. You may be asking yourself the same question Sylvia’s button asked. The three Ts– Trump, Tariffs and Trade wars, can be a wet blanket on the embers of growth, but the market can still go higher. The adage, “Bull markets don’t die of old age” may be true, but attempting to time when to get in and out of markets can be futile and dangerous to reaching your long-term financial goals. Always keep in mind that the bottom of a bear market is the start of the next bull market, and also remind yourself of your personal time horizon. The truth is nobody knows how the current bull market is going to end. 

When Will This Bull Market End?

There is no expiration date for bull markets. Nobody has a crystal ball to say when the bear market will begin and how long it may last, which is why we believe it is prudent to maintain a diversified approach and focus on the things you can control and not let fear or greed dictate your next move in your portfolio.

Maintain Discipline

Warren Buffett famously said that like dieting, successful investing is far easier to understand than to accomplish—because it requires discipline. At Intelligent Investing, we monitor and rebalance portfolios with the goal of maintaining the amount of risk we jointly agreed to take. We have a strong philosophy and set of processes that strive to reduce the emotional component of managing wealth.

Preparing for the Next Drawdown

Remember your history. Big equity drawdowns happen time and again and tend to drag down typical investor portfolios with them. The S&P 500 drawdowns worse than 20% have happened 11 times since 1926. We will have a bear market, but studies have shown that attempting to tactically avoid the next equity selloff is likely to disappoint investors. Diversification and discipline are still investors’ best bet.

We are long-term wealth managers. We try not to get caught up in the loud noise of the markets and we encourage you to do the same. If you’d like a financial accountability partner who can help minimize financial stress to maximize your life, let us know.

The Difficulty of Consistently Outperforming the Market

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The Difficulty of Consistently Outperforming the Market

Reading Time: 2 minutes

On today’s Intelligent Money Minute, we’ll interview Larry Swedroe on the difficulty of consistently outperforming the market. Over time, the markets are becoming more efficient, consequently making it harder for active managers to outperform. In this episode, Larry explains some reasons why there’s little to no evidence of persistence of outperformance. We have several upcoming podcasts that will feature Larry, so be sure to subscribe to our podcasts, if you haven’t already.

He breaks the numbers down using an example from Charles Ellis’ white paper. According to Larry, if we look at history, around 20 years ago only 20% of managers were outperforming before taxes. After taxes, it was about 10% and currently, it is approximately 2% of managers outperform before taking into consideration taxes. Unfortunately, no advisor can consistently deliver outperformance in the market. At Intelligent Investing, we believe the dominant determinant of long-term, real-life returns will be the behavior of the client and advisor. This is why we strongly believe in behavioral teamwork.

To learn more about our behavioral coaching, go to our philosophy page. You can also read “The Loser’s Game” by Charles Ellis here. We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.

Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

Since joining the Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing.

In his role as chief research officer and as a member of the firm’s Investment Policy Committee and Board of Directors, Larry regularly reviews the findings published in dozens of peer-reviewed financial journals, evaluates the outcomes and uses the result to inform the firm’s formal investment strategy recommendations.

Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Advisor Perspectives and ETF.com.

Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp.

Larry holds an MBA in finance and investment from NYU, and a bachelor’s degree in finance from Baruch College.

Rick Ferri’s Financial Heroes

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Rick Ferri Financial Heroes

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On today’s Intelligent Money Minute, we’ll interview Rick Ferri on his personal financial heroes. During this episode, Rick highlights renown professionals that left a lasting impression on him. For example, Rick talks about the influence of Warren Buffet and his financial strategies. Rick also recounts the unsung financial heroes and how they impacted his life. At Intelligent Investing, we blend three schools of thought into an insightful, independent, and innovative intelligence. Learn more here.

Check out our previous podcasts with Rick on Tips for Lump Sum Recipients and Practical Tips for Pre-Retirees. We’ll be interviewing Rick on several podcasts regarding index investing, behavioral finance, and practical tips for retirees, so be sure to subscribe to our Intelligent Money Minute podcasts.

Rick Ferri is a fellow CFA Charterholder, Marine veteran, author, and owner of Ferri Investment Solutions. He continues to write books and articles, provide educational webinars, and teach financial lectures.

Rick Ferri Bio

Rick Ferri earned a B.S. in Business Administration and an M.S. in Finance. He also holds a Chartered Financial Analyst (CFA) charter through the CFA Institute. After college, Rick served as a U.S. Marine Corps officer and fighter pilot for 20 years of active duty and reserve service.

Rick’s investment career spans three decades and offers a history of empowering people to achieve their goals. He landed in the brokerage industry in 1989 where he learned the wrong way to invest. As a result of 10 frustrating years, Rick founded one of the country’s first low-fee investment advisory firms. Rick’s firm grew to a sizable business over the next two decades due to the explosion of interest in low-fee investing. This growth provided good-paying jobs to dozens of people and allowed Rick to take on business partners with whom he generously shared his equity.   

Ferri Investment Solutions is Rick’s new firm. This modern concept provides even greater value to investors by “unbundling” adviser services whereby clients pay only for the time it takes to assist them. In addition, Rick’s industry consulting firm helps other advisers build their investment practices, and he has launched Core-4 Portfolios to provide simple model portfolios for use by a wide variety of investors. 

Mitigating Dangerous Investing Emotions

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Rick Ferri Mitigating Dangerous Investing Emotions

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On today’s Intelligent Money Minute, we’ll interview Rick Ferri on mitigating dangerous investing emotions. During this episode, Rick explains the concept of behavioral finance and the power of recognizing your emotional tendencies. He stresses the value of being introspective in order to avoid reactionary investing. In truth, no advisor can consistently deliver “outperformance.” However, we believe we offer more practical and reliable ways. Read more about our three pillars of thought here.

Check out our previous podcasts with Rick on The Power of Passive Investing and Remembering the Legacy of Jack Bogle. We’ll be interviewing Rick on several podcasts regarding index investing, behavioral finance, and practical tips for retirees, so be sure to subscribe to our Intelligent Money Minute podcasts.

Rick Ferri is a fellow CFA Charterholder, Marine veteran, author, and owner of Ferri Investment Solutions. He continues to write books and articles, provide educational webinars, and teach financial lectures. 

Rick Ferri Bio

Rick Ferri earned a B.S. in Business Administration and an M.S. in Finance. He also holds a Chartered Financial Analyst (CFA) charter through the CFA Institute. After college, Rick served as a U.S. Marine Corps officer and fighter pilot for 20 years of active duty and reserve service.

Rick’s investment career spans three decades and offers a history of empowering people to achieve their goals.  He landed in the brokerage industry in 1989 where he learned the wrong way to invest. As a result of 10 frustrating years, Rick founded one of the country’s first low-fee investment advisory firms. Rick’s firm grew to a sizable business over the next two decades due to the explosion of interest in low-fee investing. This growth provided good-paying jobs to dozens of people and allowed Rick to take on business partners with whom he generously shared his equity. Rick left the firm a few years ago and is no longer an owner.  

Ferri Investment Solutions is Rick’s new firm. This modern concept provides even greater value to investors by “unbundling” adviser services whereby clients pay only for the time it takes to assist them. In addition, Rick’s industry consulting firm helps other advisers build their investment practices, and he has launched Core-4 Portfolios to provide simple model portfolios for use by a wide variety of investors. 

The Power of Passive Investing

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Passive Investing
 

Reading Time: 2 minutes

On today’s Intelligent Money Minute, we’ll interview Rick Ferri on the power of passive investing. During this episode, Rick defines passive investing and why the biggest investing hurdle is not the market, but ourselves. He highlights the value of spreading risks and rewards in a portfolio rather than attempting to beat the market.  At Intelligent Investing we believe in the following portfolio practices: asset allocation, diversification, and rebalancing. You can read more about our wealth management philosophy here.

We’ll be interviewing Rick on several podcasts regarding index investing, behavioral finance, and practical tips for retirees, so be sure to subscribe to our Intelligent Money Minute podcasts.

Rick Ferri is a fellow CFA Charterholder, Marine veteran, author, and owner of Ferri Investment Solutions. He continues to write books and articles, provide educational webinars, and teach financial lectures. 

Rick Ferri Bio

Rick Ferri earned a B.S. in Business Administration and an M.S. in Finance. He also holds a Chartered Financial Analyst (CFA) charter through the CFA Institute. After college, Rick served as a U.S. Marine Corps officer and fighter pilot for 20 years of active duty and reserve service.

Rick’s investment career spans three decades and offers a history of empowering people to achieve their goals.  He landed in the brokerage industry in 1989 where he learned the wrong way to invest. As a result of 10 frustrating years, Rick founded one of the country’s first low-fee investment advisory firms. Rick’s firm grew to a sizable business over the next two decades due to the explosion of interest in low-fee investing. This growth provided good-paying jobs to dozens of people and allowed Rick to take on business partners with whom he generously shared his equity. Rick left the firm a few years ago and is no longer an owner.  

Ferri Investment Solutions is Rick’s new firm. This modern concept provides even greater value to investors by “unbundling” adviser services whereby clients pay only for the time it takes to assist them. In addition, Rick’s industry consulting firm helps other advisers build their investment practices, and he has launched Core-4 Portfolios to provide simple model portfolios for use by a wide variety of investors. 

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