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Passing Shots

The Fifth Set Blog

Topics: Asset Allocation, Diversification, Evidence-Based Investing, Fixed Income, Investor Behavior, Long-term investing, Portfolio Management

Buy Low and Sell High: Simple but Not Easy

Buy low, sell high…maybe the most obvious axiom in investing.  It seems so obvious, yet in practice, most investors have difficulty buying the worst-performing assets or selling the best-performing assets.  “Wait…you want to sell this thing that’s been going straight up so we can buy  …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 »

Why an Allocation to Bonds Always Makes Sense

A decline in stock prices during a bout of market volatility often elicits the comment that “this is a buying opportunity because markets always bounce back”.  From a historical perspective, that’s generally been true but is it possible for a stock drop to be something  …read more »

A World Without Stock Picking Skill – Revisited

In a follow up to an S&P Dow Jones Indices Study from the summer 2014 “Does Past Performance Matter? The Persistence Scorecard”, a New York Times article takes a look at the performance of the two “winning” mutual funds from the 2014 study. Winning, in  …read more »

A Good Time to Review Investor Biases

Investors (all of us) are hard-wired to make poor investment decisions.  Among other biases, we become over-confident when markets rise and assume the worst will continue when markets fall. We assume we have special knowledge about companies we work for or live close to or  …read more »

Global Asset Allocation: Sometimes You Have to Take the Pain

Diversifying a portfolio through the global allocation of various asset classes increases expected return and reduces portfolio volatility over time.  Both worthwhile goals.  But like eating well and exercising to stay healthy, global asset allocation doesn’t happen without a little suffering. In 2014, investors with  …read more »

The Key to Successful Investing

Responding to an email, I came up with this and thought it was worth sharing… The fundamental problem with bond guys is they are programmed to focus on what could go wrong.  Equity guys are programmed to ignore everything that could go wrong.  Strategic asset  …read more »

Why Pay for Passive…Part Three

In a recent white paper, “Vanguard – Quantifying Advisor Alpha“, mutual fund company Vanguard attempts to quantify the added value of the “passive” investment advisor.  They estimate the value at as much as 3% per year without any attempt at outperforming the market. In two  …read more »

Broker Conflicts of Interest and Municipal Bond Investments

Is it a coincidence that seemingly every prospective client’s taxable account currently managed by a brokerage firm includes the same two security types; expensive actively-managed equity mutual funds and individual municipal bonds? Viewed through the lens of massive conflicts of interest, it’s easy to see  …read more »

What Stock to Buy? Hey, Mom, Don’t Ask Me

A recent New York Times article, written by Harvard economist Gregory Mankiw, offers a great synthesis of the investment principles upon which FSIA manages client portfolios. Efficient Market Hypothesis:  Stock prices quickly reflect publicly available news and information so attempts to outperform the market through  …read more »