Words of Market Wisdom from the Father of Efficient Markets
Much of Fifth Set’s investment philosophy is drawn from the academic research findings of University of Chicago Professor Eugene Fama. A 2013 Nobel laureate in Economics, Professor Fama was recently interviewed for a New York Times article “Talking War and Market Volatility With a Giant of Economics”. With increased market volatility reflecting the continuing impacts […]
FAANG: Revisited – Recent Performance Shows Nothing Lasts Forever
On April 20, 2022, Netflix stock fell 37% following a disappointing earnings report the previous day. As a member of the FAANG group of large technology stocks (Meta “Facebook”, Amazon, Apple, Netflix, and Alphabet “Google”), it seemed like a good time to revisit a post we wrote back on October 30, 2020. In that post, […]
Will FAANG Stocks Continue their Dominant Outperformance?
Much has been made of the recent performance of large U.S. technology stocks. In particular, the performance of the FAANG[1] stocks has captured the imagination of many investors. To frame the discussion, let us look at how FAANG stocks have performed compared to standard benchmarks over the recent past. Over the prior year ending October […]
“In Investing, You Get What You Don’t Pay For”
That was the title of a keynote address given by Vanguard founder John Bogle in February 2005. For Bogle, a prominent evangelist of low-cost investing, the premise, simply stated, was that investment expenses directly erode investor returns. Investor Returns = Market Returns – Expenses Market returns are going to be what they are going to […]
IPOs – High Profiles, Low Returns – Following the Evidence
One of the benefits derived from the evidence-based investment approach is the systematic avoidance of underperforming investment strategies. Media narratives and marketing drive many of these strategies, that while they might help increase advertising sales and commissions, do little to help investors develop successful investment portfolios. One such currently popular strategy is investing in newly […]
Seven Bullet Points to Address Investor Client Standard of Care
The financial advice industry has long been separated between 1) Registered Investment Advisor firms (RIAs), which operate under the Investment Advisers Act of 1940 and whose representatives’ duty is to deliver investment advice, and 2) Broker-Dealers, whose representatives are in the business of selling financial products. Previously, there was a clear distinction between the standard […]
The Guru and The Investor: Act 2 – The Evidence-Based Advisor Strikes Back
Act Two The Setting Following his interview of a hedge-fund manager to see if he should manage his retirement assets, the Investor turns his search to a different type of advisor, for a philosophy based on something called ‘evidence-based investing’. This seemingly outlandish idea is grounded in the findings of academic research in finance to […]
The Evidence is in (Again). Indexing Beats Active Management.
S&P Dow Jones Indices released their latest SPIVA (S&P Index vs Active) scorecard for the period ending December 2018. If you’re a fan of active fund managers, the news is not good. Following are some quick data points and a video from NBR with Bob Pisani detailing the results: For the ninth consecutive year, the […]
The Guru and The Investor: A Hedge Fund Story
Act One The Setting Guru appears on CNBC to explain what will happen with interest rates, Brexit, and the economy over the next two years. Investor sees Guru on TV and assumes that CNBC would only have people on their shows who knew what they were talking about. Needing a place to invest money for […]
Déjà Vu All Over Again
Investment fads do not lead to investment success. Discipline to a long-term investment strategy is the key. This post from Dimensional Fund Advisors offers a compelling rebuttal of past investment fads and an alternative investment approach driven by evidence and academic research…