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Passing Shots

The Fifth Set Blog

Topics: Active Management, Asset Allocation, Brokers vs. Advisors, Efficient Market Hypothesis, Evidence-Based Investing, Fiduciary, Index, Index Investing, Long-term investing, Passive, Portfolio Management

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  …read more »

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  …read more »

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  …read more »

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  …read more »

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  …read more »

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…     Ianis  …read more »

Diversification: It’s about more than risk control

“Diversify your portfolio!” implored the well-meaning investment advisor. Over the years, you have likely heard this phrase many times and from many sources, including me. ‘Diversification’ has been drilled into the head of many an investor and for good reason: Diversification[1] is, in fact, a  …read more »

A Brief History of the Index Fund

On the 40th anniversary[1] of the launch of the First Index Investment Trust (now the Vanguard 500 Index Fund), it is interesting to note how the original premise of index funds has held up over time.  The premise that a low-cost, unmanaged fund, simply composed  …read more »

Using the Fama/French Five Factor Model to Assess Actively Managed Fund Performance

A recent study conducted by Dimensional Fund Advisors assessed the performance of actively managed mutual funds by comparing fund performance to the performance predicted by the Fama/French five factor model.  The five-factor model tests fund performance based on their exposure to the market, value, size,  …read more »

Investor (Mis)behavior

A well-written recent New York Times article seeks to elucidate the causes of investor (mis)behavior through recent research into behavioral finance.  In the article, the author, Gary Belsky, details five cognitive biases that are hard-wired into human brains.  These biases form the basis for investor  …read more »